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What changed in TORO CO's 10-K — 2023 vs 2024

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Paragraph-level year-over-year comparison of TORO CO's 2023 and 2024 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2024 report.

+317 added−312 removedSource: 10-K (2024-12-18) vs 10-K (2023-12-20)

Top changes in TORO CO's 2024 10-K

317 paragraphs added · 312 removed · 255 edited across 9 sections

Item 1. Business

Business — how the company describes what it does

57 edited+17 added−11 removed107 unchanged
Biggest changeCARB's two phase implementation of net-zero emissions requirements for small off-road engines, like those contained in many lawn and garden equipment, will begin for all products with model year 2024 and onward. • The SEC has proposed rules that would require registrants to include certain climate-related disclosures in their registration statements and periodic reports, including greenhouse gas emission data and climate-related financial statement metrics.
Biggest changeEPA implementation of Tier 4 emission requirements applicable to diesel engines, China, the European Union ("EU") and its member states, and the United Kingdom have adopted similar regulations. CARB's two phase implementation of net-zero emissions requirements for small off-road engines, like those contained in many lawn and garden equipment, will begin for all products with model year 2024 and onward.
Our products are marketed and sold worldwide through a network of distributors, dealers, mass retailers, hardware retailers, equipment rental centers, and home centers, as well as online and direct to end-users under the primary trademarks of Toro®, Ditch Witch®, eXmark®, Spartan®, BOSS®, Ventrac®, American Augers®, Trencor®, Pope®, Subsite®, HammerHead®, Radius®, Perrot®, Hayter®, Unique Lighting Systems®, Irritrol®, and Lawn-Boy®, most of which are registered in the United States ("U.S.") and/or in the primary countries outside the U.S. where we market our products branded under such trademarks.
Our products are marketed and sold worldwide through a network of distributors, dealers, mass retailers, hardware retailers, equipment rental centers, and home centers, as well as online and direct to end-users under the primary trademarks of Toro®, Ditch Witch®, eXmark®, Spartan®, BOSS®, Ventrac®, American Augers®, Trencor®, Subsite®, HammerHead®, Radius®, Perrot®, Hayter®, Unique Lighting Systems®, Irritrol®, and Lawn-Boy®, most of which are registered in the United States ("U.S.") and/or in the primary countries outside the U.S. where we market our products branded under such trademarks.
Such products are utilized by specialty contractors worldwide to install water, gas, electric, telecommunication, fiber optic, and other utility distribution systems. Rental and Specialty Construction Market We design, manufacture, market, and sell Toro and Ditch Witch-branded equipment products that are intended to provide innovative solutions to serve the rental and specialty construction market.
Such products are utilized by specialty contractors worldwide to install water, gas, electric, telecommunication, fiber optic, broadband, and other utility distribution systems. Rental and Specialty Construction Market We design, manufacture, market, and sell Toro and Ditch Witch-branded equipment products that are intended to provide innovative solutions to serve the rental and specialty construction market.
We strive to foster safe, inclusive and respectful workplaces wherever we do business, including prohibiting all forms of child labor and forced labor including indentured labor, bonded labor, military labor, slave labor and any form of human trafficking. We expect our business partners to comply with local labor and employment laws wherever they operate.
We strive to foster safe, inclusive and respectful workplaces wherever we do business, including prohibiting all forms of child labor and forced labor including indentured labor, bonded labor, military labor, slave labor and any form of human trafficking. We expect our business partners and suppliers to comply with local labor and employment laws wherever they operate.
Our current marketing strategy is to maintain distinct brands and brand identification for Toro, Ditch Witch, eXmark, Spartan, BOSS, Ventrac, American Augers, Trencor, Pope, Subsite, HammerHead, Radius, Perrot, Hayter, Unique Lighting Systems, Irritrol, and Lawn-Boy products.
Our current marketing strategy is to maintain distinct brands and brand identification for Toro, Ditch Witch, eXmark, Spartan, BOSS, Ventrac, American Augers, Trencor, Subsite, HammerHead, Radius, Perrot, Hayter, Unique Lighting Systems, Irritrol, and Lawn-Boy products.
These products primarily consist of stand-on skid steers, walk-behind trenchers, stump grinders, and turf renovation products. We also have a line of Toro-branded rental products that feature material handlers, compaction equipment, and other concrete construction equipment.
These products primarily consist of stand-on skid steers, walk-behind trenchers, stump grinders, and turf renovation products. We also have a line of Toro-branded rental products that feature material handlers and other concrete construction equipment.
Community support is core to our culture and our efforts reflect a dedication to action and engagement that enriches the lives, communities, industries and land that we serve. Our community efforts center on four areas: Employees, Community, Industry and Land. Water. Thrive.
Community support is core to our culture and our efforts reflect a dedication to action and engagement that enriches the lives, communities, industries and land that we serve. Our community efforts center on four areas: Employees, Community, Industry and "Land. Water.
Through employee volunteerism and donations, corporate giving, and in-kind product donations, we enhance and beautify outdoor spaces while also supporting the shared value of our partner communities and organization.
Thrive." Through employee volunteerism and donations, corporate giving, and in-kind product donations, we enhance and beautify outdoor spaces while also supporting the shared value of our partner communities and organization.
Our four collective bargaining agreements expire in October 2025, March 2026, June 2026, and October 2026. We consider our employee relations to be good and currently do not expect any significant difficulties in renewing these agreements. We have not experienced any strikes or work stoppages in the past three years.
Our four collective bargaining agreements expire in October 2025, March 2026, May 2026, and October 2026. We consider our employee relations to be good and currently do not expect any significant difficulties in renewing these agreements. We have not experienced any strikes or work stoppages in the past three years.
Talent Development We strive to equip our teams and talent to deliver on the company's commitments to excellence by providing all employees a wide range of professional development opportunities, both formal and informal, at all stages in their careers.
Talent Development We strive to prepare our teams and talent to deliver on the company's commitments to excellence by providing all employees a wide range of professional development opportunities, both formal and informal, at all stages in their careers.
Human Rights Policy We are committed to respecting human rights in all respects of our global operations under the Toro Company Human Rights Policy. We believe that we have a responsibility to ensure that human rights are understood and observed in every location in which we operate.
Human Rights Policy We are committed to upholding human rights in all respects of our global operations under The Toro Company Human Rights Policy. We believe that we have a responsibility to ensure that human rights are understood and observed in every location in which we operate.
We are not materially dependent on any one or more of our patents; however, certain TTC trademarks that contribute to our identity and the recognition of our products and services, including but not limited to the Toro® name and logo, are an integral part of our business. 8 Table of Contents We review certain patents issued by the U.S.
We are not materially dependent on any one or more of our patents; however, certain TTC trademarks that contribute to our identity and the recognition of our products and services, including but not limited to the Toro® name and logo, are an integral part of our business. We review certain patents issued by the U.S.
We generally purchase commodities, components, parts, and accessories based upon market prices that are established with suppliers as part of the purchase process and generally attempt to obtain firm pricing from most of our suppliers for volumes consistent with planned production and estimates of wholesale and retail demand for our products.
We generally purchase commodities, components, parts, and accessories based upon market prices that are established with suppliers as part of the purchase process and generally attempt to obtain firm pricing from most of our suppliers for volumes consistent with 7 Table of Contents planned production and estimates of wholesale and retail demand for our products.
For a description of our material intellectual property legal proceedings, refer to the headings titled "Litigation" and "Litigation Settlement" within Note 11, Commitments and Contingencies , of the Notes to Consolidated Financial Statements included in Part II, Item 8, "Financial Statements and Supplementary Data," of this Annual Report on Form 10-K.
For a description of our material intellectual property legal proceedings, refer to the heading titled "Litigation" within Note 11, Commitments and Contingencies , of the Notes to Consolidated Financial Statements included in Part II, Item 8, "Financial Statements and Supplementary Data," of this Annual Report on Form 10-K.
We also market and sell irrigation products for the golf market under the Toro brand that are designed to provide innovative water application solutions for golf course turf maintenance. These irrigation products predominantly consist of sprinkler heads, controllers, turf sensors, valves and operating software.
We also market and sell irrigation products for the golf market under the Toro brand that are designed to provide innovative water application solutions for golf course turf maintenance. These irrigation 4 Table of Contents products predominantly consist of sprinkler heads, controllers, turf sensors, valves and operating software.
Seasonal weather patterns can impact the timing of the key selling seasons of our channel partners, which may cause our quarterly financial results to differ between fiscal years as demand for our products and related shipment volumes can shift between quarters.
Seasonal weather patterns can impact the timing of the key selling seasons of our channel partners, which may cause 8 Table of Contents our quarterly financial results to differ between fiscal years as demand for our products and related shipment volumes can shift between quarters.
To help our employees make a meaningful impact on organizations that are important to them and us, we provide eligible employees in the U.S. up to 20 hours paid time off to volunteer. As part of our Land. Water.
To help our employees make a meaningful impact on organizations that are important to them and us, we provide eligible employees in the U.S. up to 20 hours paid time off to volunteer. 12 Table of Contents As part of our "Land. Water.
We also provide corporate governance and other information, including our sustainability report, on our website. The information contained on our website or connected to our website is not incorporated by reference into, and should not be considered part of, this Annual Report on Form 10-K.
We also provide corporate governance and other information, including our sustainability report, on our website. The information contained on our website or connected to our website is not incorporated by reference into, and should not be considered part of, this Annual Report on Form 10-K. 14 Table of Contents
Accounts receivable balances typically decrease between May and December when payments are received. Our financing requirements are subject to variations due to seasonal changes in working capital levels, which typically increase in the first half of our fiscal year and decrease in the second half of our fiscal year.
Accounts receivable balances typically decrease in the second half of our fiscal year when payments are received. Our financing requirements are subject to variations due to seasonal changes in working capital levels, which typically increase in the first half of our fiscal year and decrease in the second half of our fiscal year.
Our production levels and 7 Table of Contents inventory management goals are based on estimates of wholesale and retail demand for our products, taking into account production capacity; commodity, component part, and labor availability; timing of shipments; and field inventory levels.
Our production levels and inventory management goals are based on estimates of wholesale and retail demand for our products, taking into account production capacity; commodity, component part, and labor availability; timing of shipments; and field inventory levels.
With respect to acquired properties and businesses, we conduct due diligence regarding 14 Table of Contents potential exposure to environmental liabilities and overall regulatory compliance but cannot be certain that we have identified or will identify all adverse environmental conditions or non-compliance with applicable laws, rules and regulations.
With respect to acquired properties and businesses, we conduct due diligence regarding potential exposure to environmental liabilities and overall regulatory compliance but cannot be certain that we have identified or will identify all adverse environmental conditions or non-compliance with applicable laws, rules and regulations.
In addition to our irrigation products, we market and sell Unique Lighting Systems-branded products primarily consisting of a line of lighting fixtures and transformers designed for commercial and residential landscapes.
In addition to our irrigation products, we market and sell Unique Lighting Systems-branded products primarily consisting of a line of lighting fixtures and transformers designed for 5 Table of Contents commercial and residential landscapes.
Select irrigation and lighting products are sold to professional irrigation and lighting distributors and dealers, and certain professional-grade retail irrigation products are sold to home centers. Products for the rental, specialty, and underground construction markets are sold to dealers and rental companies, as well as direct to end-users in certain markets.
Select irrigation and lighting products are sold to professional irrigation and lighting distributors and dealers, and certain professional-grade retail irrigation products are sold to home centers. Products for the rental, specialty, and underground construction markets are sold to dealers and rental companies, as well as direct to end-users in certain markets. Landscape contractor turf products are also sold to dealers.
The following sections describe our Residential segment products. Walk Power Mower Products We design, manufacture, market, and sell walk power mower equipment products under our Toro and Lawn-Boy brand names, as well as the Hayter brand in the United Kingdom. Our walk power mower equipment products are designed to provide innovative turf cutting solutions primarily to homeowners.
Walk Power Mower Products We design, manufacture, market, and sell walk power mower equipment products under our Toro and Lawn-Boy brand names, as well as the Hayter brand in the United Kingdom. Our walk power mower equipment products are designed to provide innovative turf cutting solutions primarily to homeowners.
The European Union Corporate Sustainability Reporting Directive applies to both EU and non-EU in-scope entities and would require them to disclose various metrics relating to climate change, biodiversity, workforce, supply chain, and business ethics. • The U.S. federal government, several U.S. states, and certain international jurisdictions in which we sell our products, including the EU and each of its member states, have implemented one or more of the following: product life-cycle laws, rules, or regulations, which are intended to reduce waste and environmental and human health impact, and require manufacturers to label, collect, dispose, and recycle certain products, including some of our products, at the end of their useful life, including, but not limited to (i) the Waste Electrical and Electronic Equipment directive, which mandates the labeling, collection, and disposal of specified waste electrical and electronic equipment; (ii) the Restriction on the use of Hazardous Substances directive or similar substance level laws, rules, or regulations, which restrict the use of several specified hazardous materials in the manufacture of specific types of electrical and electronic equipment; (iii) the Registration, Evaluation, Authorization and Restriction of Chemicals directive or similar substance level laws, rules, or regulations that require notification of use of certain chemicals, or ban or restrict the use of certain chemicals; (iv) the Battery Directive, which regulates the manufacture and disposal of batteries; (v) country of origin laws, rules, or regulations, which require certification of the geographic origin of our finished goods products and/or components used in our products through documentation and/or physical markings, as applicable; (vi) energy efficiency laws, rules, or regulations, which are intended to reduce the use and inefficiencies associated with energy and natural resource consumption and require specified efficiency ratings and capabilities for certain products; (vii) outdoor noise laws, which are intended to reduce noise emissions in the environment from outdoor equipment; (viii) conflict minerals laws, such as the Dodd-Frank Wall Street Reform and Consumer Protection Act and the rules promulgated by the SEC, which require specific procedures for the determination and disclosure of the use of certain minerals, known as "conflict minerals," which are mined from the Democratic Republic of the Congo and adjoining countries; (ix) other product substance restriction laws, some of which require certain labeling of products, such as California Proposition 65; (x) electromagnetic compatibility laws and regulations, such as the EU Electromagnetic Compatibility directive, and similar laws and regulations in other markets; (xi) wireless product type approvals and licenses in global markets and the EU Radio Equipment Directive and similar laws and regulations related to wireless and radio usage; and (xii) supply chain transparency laws and regulations addressing modern slavery and human trafficking. • Our products may be subject to various federal, state, and international laws, rules, and regulations that are designed to protect users, including rules and regulations of the U.S.
TTC is a reporting entity under these laws and management is monitoring the development of implementing regulations. • The U.S. federal government, several U.S. states, and certain international jurisdictions in which we sell our products, including the EU and each of its member states, have implemented one or more of the following: product life-cycle laws, rules, or regulations, which are intended to reduce waste and environmental and human health impact, and require manufacturers to label, collect, dispose, and recycle certain products, including some of our products, at the end of their useful life, including, but not limited to (i) the Waste Electrical and Electronic Equipment directive, which mandates the labeling, collection, and disposal of specified waste electrical and electronic equipment; (ii) the Restriction on the use of Hazardous Substances directive or similar substance level laws, rules, or regulations, which restrict the use of several specified hazardous materials in the manufacture of specific types of electrical and electronic equipment; (iii) the Registration, Evaluation, Authorization and Restriction of Chemicals directive or similar substance level laws, rules, or regulations that require notification of use of certain chemicals, or ban or restrict the use of certain chemicals; (iv) the Battery Directive, which regulates the manufacture and disposal of batteries; (v) country of origin laws, rules, or regulations, which require certification of the geographic origin of our finished goods products and/or components used in our products through documentation and/or physical markings, as applicable; (vi) energy efficiency laws, rules, or regulations, which are intended to reduce the use and inefficiencies associated with energy and natural resource consumption and require specified efficiency ratings and capabilities for certain products; (vii) outdoor noise laws, which are intended to reduce noise emissions in the environment from outdoor equipment; (viii) conflict minerals laws, such as the Dodd-Frank Wall Street Reform and Consumer Protection Act and the rules promulgated by the SEC, which require specific procedures for the determination and disclosure of the use of certain minerals, known as "conflict minerals," which are mined from the Democratic Republic of the Congo and adjoining countries; (ix) other product substance restriction laws, some of which require certain labeling of products, such as California Proposition 65; (x) electromagnetic compatibility laws and regulations, such as the EU Electromagnetic Compatibility directive, and similar laws and regulations in other markets; (xi) wireless product type approvals and licenses in global markets and the EU Radio Equipment Directive and similar laws and regulations related to wireless and radio usage; and (xii) supply chain transparency laws and regulations addressing modern slavery and human trafficking. • Our products may be subject to various federal, state, and international laws, rules, and regulations that are designed to protect users, including rules and regulations of the U.S.
As a result, our shipment volumes have historically been the highest in our fiscal second quarter, and retail demand for our products is generally highest in our fiscal third quarter. Typically, our accounts receivable balances increase between January and April as a result of higher shipment volumes and extended payment terms made available to our customers.
As a result, our shipment volumes have historically been the highest in our fiscal second quarter, and retail demand for our products is generally highest in our fiscal third quarter. Typically, our accounts receivable balances increase in the first half of our fiscal year as a result of higher shipment volumes and extended payment terms made available to our customers.
Unions and Collective Bargaining Agreements As of October 31, 2023, approximately 12.4 percent of our employees were represented by a union under a collective bargaining agreement. Our collective bargaining agreements typically are for terms of three to five years, and from time to time, our collective bargaining agreements expire and come up for renegotiation.
Unions and Collective Bargaining Agreements As of October 31, 2024, approximately 10.5 percent of our employees were represented by a union under a collective bargaining agreement. Our collective bargaining agreements typically are for terms of three to five years, and from time to time, our collective bargaining agreements expire and come up for renegotiation.
The state of California has recently passed two bills that will require certain companies doing businesses in the state to disclose greenhouse gas emissions and climate-related financial risk information.
The state of California passed two bills that will require certain companies doing businesses in the state to disclose GHG emissions and climate-related financial risk information.
However, our Residential segment snow thrower products are generally manufactured in the summer and fall months but may be extended into the winter months, depending upon weather conditions in key regions, the related demand for such products and certain impacts from global supply chain disruptions.
However, our Residential segment snow thrower products are generally manufactured in the summer and fall months but may be extended into the winter months, depending upon weather conditions in key regions, the related demand for such products.
Compensation and Benefits We conduct compensation market benchmarking on a regular basis to ensure our pay remains competitive to attract and retain superior talent.
Compensation and Benefits We conduct compensation market benchmarking on a regular basis to provide competitive pay to attract and retain superior talent.
Our goal is to foster a culture of trust and respect for all stakeholders and create a productive, supportive and thriving work environment for all TTC employees. Number of Employees During fiscal 2023, we employed an average of 10,982 employees. The total number of employees as of October 31, 2023 was 10,706.
Our goal is to foster a culture of trust and respect for all stakeholders and create a productive, supportive and thriving work environment for all TTC employees. Number of Employees During fiscal 2024, we employed an average of 11,464 employees. The total number of employees as of October 31, 2024 was 11,108.
These Other activities consist of earnings (loss) from a wholly-owned domestic distribution company, certain corporate activities, and the elimination of intersegment revenues and expenses. Net sales of our reportable segments and Other activities accounted for the following percentages of our consolidated net sales for fiscal 2023: Professional, 80.7 percent; Residential, 18.8 percent; and Other, 0.5 percent.
These Other activities consist of earnings (loss) from a wholly-owned domestic distribution company, certain corporate activities, and the elimination of intersegment revenues and expenses. Net sales of our reportable segments and Other activities accounted for the following percentages of our consolidated net sales for fiscal 2024: Professional, 77.6 percent; Residential, 21.8 percent; and Other, 0.6 percent.
Information contained or referenced on our website, including in our Sustainability Report, is not incorporated by reference and does not form a part of this Annual Report on Form 10-K. 13 Table of Contents Environmental Matters and Other Governmental Regulation Our business, operations, facilities, and products are subject to numerous international, federal, state, and other governmental laws, rules, and regulations relating to, among others, climate change; emissions to air, including Tier 4 or similar engine emission regulations; discharges to water; restrictions placed on water usage and water availability; product and associated packaging; use of certain chemicals; restricted substances, including "conflict minerals" disclosure rules; recycling and waste disposal; import and export compliance, including country of origin certification requirements; worker and product user health and safety; energy efficiency; product life-cycles; outdoor noise laws; and the generation, use, handling, labeling, collection, management, storage, transportation, treatment, and disposal of hazardous substances, wastes, and other regulated materials.
Environmental Matters and Other Governmental Regulation Our business, operations, facilities, and products are subject to numerous international, federal, state, and other governmental laws, rules, and regulations relating to, among others, climate change; emissions to air, including Tier 4 or similar engine emission regulations; discharges to water; restrictions placed on water usage and water availability; product and associated packaging; use of certain chemicals; restricted substances, including "conflict minerals" disclosure rules; recycling and waste disposal; import and export compliance, including country of origin certification requirements; worker and product user health and safety; energy efficiency; product life-cycles; outdoor noise laws; and the generation, use, handling, labeling, collection, management, storage, transportation, treatment, and disposal of hazardous substances, wastes, and other regulated materials.
Order Backlog Our order backlog represents unfulfilled customer orders at a point in time. The dollar value of our order backlog is equal to the gross sales value that we expect to bill to the customer and is not reduced for expected variable consideration related to certain of our sales promotions and incentives programs.
The dollar value of our order backlog is equal to the gross sales value that we expect to bill to the customer and is not reduced for expected variable consideration related to certain of our sales promotions and incentives programs.
Residential segment products, such as walk power mowers, zero-turn riding mowers, and snow throwers, are generally sold to home centers, mass retailers, dealers, and hardware retailers, as well as online and direct to end-users. In certain markets, these same products are sold to distributors for resale to hardware retailers and dealers.
Snow and ice management products are primarily sold to distributors and dealers for resale to contractors. Residential segment products, such as walk power mowers, zero-turn riding mowers, and snow throwers, are generally sold to home centers, mass retailers, dealers, and hardware retailers, as well as online and direct to end-users.
Residential Segment We market and sell our Residential segment products to homeowners through a variety of distribution channels, including outdoor power equipment distributors and dealers, mass retailers, hardware retailers, and home centers, as well as online and direct to end-users. We also license our trademark on certain home solutions products as a means of expanding our brand presence.
Residential Segment We market and sell our Residential segment products to homeowners through a variety of distribution channels, including outdoor power equipment distributors and dealers, mass retailers, hardware retailers, and home centers, as well as online and direct to end-users.
The following sections describe our Professional segment products by market. 4 Table of Contents Golf Market We design, manufacture, market, and sell equipment products under the Toro and Ventrac brands that are intended to provide innovative solutions for golf course turf maintenance.
We design, manufacture, market, and sell equipment products under the Toro and Ventrac brands that are intended to provide innovative solutions for golf course turf maintenance.
Insights, themes and recommendations from cohort teams have contributed to actions in many areas for the company.
Insights, themes and recommendations from cohort teams have contributed to actions in many areas for the company. Health and Wellness The health and wellness of our employees are critical to our success.
These products are primarily sold to our customers in Australia and New Zealand. International Operations We currently manufacture our products in the U.S., Mexico, the United Kingdom, Italy, Romania, Germany, Poland, Australia, and China for sale throughout the world. We maintain sales offices in the U.S., the United Kingdom, Australia, Japan, China, Italy, Poland, Germany, Spain, France and Belgium.
International Operations We currently manufacture our products in the U.S., Mexico, the United Kingdom, Italy, Romania, Germany, Poland, Australia, and China for sale throughout the world. We maintain sales offices in the U.S., the United Kingdom, Australia, Japan, China, Italy, Poland, Germany, Spain, and Belgium. New product development is pursued primarily in the U.S. with the intention of global distribution.
In addition to traditional training, we use safety scorecards, standardized signage, and visual management throughout our facilities. Safety best practices are also regularly featured in our employee newsletters and town halls. Employee Engagement We provide all employees with the opportunity to share their opinions and feedback on our culture through an engagement survey.
Safety best practices are also regularly reviewed by management and TTC's Board of Directors, and featured in our employee newsletters and town halls. 11 Table of Contents Employee Engagement We provide all employees with the opportunity to share their opinions and feedback on our culture through an engagement survey.
These products are mainly sold through distributors and dealers who market and sell to end-customers primarily consisting of landscape contractors, municipalities, and other government entities. 5 Table of Contents Commercial Irrigation and Lighting Market Irrigation products are designed, manufactured, marketed, and sold under the Toro and Irritrol brands and primarily include rotors; sprinkler bodies and nozzles; plastic, brass, and hydraulic valves; drip tubing and subsurface irrigation; electric control devices; and wired and wireless rain, freeze, climate, and soil sensors.
Irrigation and Lighting Market Irrigation products are designed, manufactured, marketed, and sold under the Toro and Irritrol brands and primarily include rotors; sprinkler bodies and nozzles; plastic, brass, and hydraulic valves; drip tubing and subsurface irrigation; electric control devices; and wired and wireless rain, freeze, climate, and soil sensors.
Home Solutions Products Our home solutions equipment products are designed, manufactured, marketed, and sold under the Toro and Pope brand names.
Yard Tools and Garden Equipment Products Our yard tools and garden equipment products are designed, manufactured, marketed, and sold under the Toro brand name.
Our Toro-branded home solution equipment products consist of a variety of yard tools that generally include battery, electric, and/or gas-powered options and primarily consist of grass trimmers, hedge trimmers, blower-vacuums, chainsaws, edgers, cultivators, string mowers, and related parts and accessories that are designed to provide innovative yard maintenance solutions to homeowners. 6 Table of Contents Our Pope-branded home solution products consist of garden watering and irrigation products that primarily include hoses; reels, carts and hangers; sprinklers; hand sprays and wands; hose end fittings; tap timers; and various irrigation tools designed to develop and maintain gardens.
Our Toro-branded yard tools and garden equipment products consist of a variety of battery, electric, and/or gas-powered options and primarily consist of grass trimmers, hedge trimmers, blower-vacuums, chainsaws, edgers, cultivators, string mowers, and related parts and accessories that are designed to provide innovative yard maintenance solutions to homeowners.
New product development is pursued primarily in the U.S. with the intention of global distribution. Our net sales outside the U.S. were 20.8 percent, 19.5 percent, and 20.9 percent of total consolidated net sales for fiscal 2023, 2022, and 2021, respectively.
Our net sales outside the U.S. were 20.1 percent, 20.8 percent, and 19.5 percent of total consolidated net sales for fiscal 2024, 2023, and 2022, respectively.
For example, persistent hot and dry weather patterns or excessive snowfall across key regions may impact the rate at which inventory needs to be replenished either negatively or positively. 9 Table of Contents Customers, Distribution, and Marketing We market and sell the majority of our products through more than 150 distributors worldwide, as well as a large number of equipment dealers, irrigation dealers and distributors, mass retailers, hardware retailers, equipment rental centers, and home centers, as well as online and direct to end-users in more than 125 countries.
Customers, Distribution, and Marketing We market and sell the majority of our products through more than 150 distributors worldwide, as well as a large number of equipment dealers, irrigation dealers and distributors, mass retailers, hardware retailers, equipment rental centers, and home centers, as well as online and direct to end-users in more than 125 countries.
The purpose of these agreements is to provide end-users of our products alternative financing options when purchasing our products. 10 Table of Contents Open Account Terms Additionally, we continue to provide financing in the form of open account terms directly to home centers and mass retailers, general line irrigation dealers, certain domestic and international distributors and dealers, ag-irrigation dealers and distributors, government customers, and rental companies.
Open Account Terms Additionally, we continue to provide financing in the form of open account terms directly to home centers and mass retailers, general line irrigation dealers, certain domestic and international distributors and dealers, ag-irrigation dealers and distributors, government customers, and rental companies. Order Backlog Our order backlog represents unfulfilled customer orders at a point in time.
Such programs are designed to support employees’ physical and mental health by providing tools and resources to help them improve or maintain their health status and encourage engagement in healthy behaviors. 12 Table of Contents Diversity, Equity and Inclusion We recognize that our best performance comes when our teams are diverse, and accordingly, diversity, equity and inclusion ("DEI") is core to us.
Such programs are designed to support employees’ physical and mental health by providing tools and resources to help them improve or maintain their health status and encourage engagement in healthy behaviors.
Additional Information Additional information is included in our Fiscal 2022 Sustainability Report, which is available on our website under the "Sustainability" section of our website located at www.thetorocompany.com .
Additional Information Additional information is included in our Fiscal 2023 Sustainability Report, which is available on our website under the "Sustainability" section of our website located at www.thetorocompany.com . Information contained or referenced on our website, including in our Sustainability Report, is not incorporated by reference and does not form a part of this Annual Report on Form 10-K.
As a result of our international operations, we are exposed to foreign currency exchange rate risk arising from transactions in the normal course of business. For additional information regarding our foreign currency exchange rate risk exposure, refer to Part II, Item 7A, "Quantitative and Qualitative Disclosures about Market Risk," of this Annual Report on Form 10-K.
For additional information regarding our foreign currency exchange rate risk exposure, refer to Part II, Item 7A, "Quantitative and Qualitative Disclosures about Market Risk," of this Annual Report on Form 10-K. 6 Table of Contents Engineering, Research and Innovation We believe that our longstanding commitment to innovation and quality in our products has been a key driver of our market success.
We believe bringing more diversity to our workforce and our commitment to employee wellness and environmental stewardship create a sense of community, allowing employees to take pride in their jobs and live the TTC values. 11 Table of Contents Our employees are guided further by our global Code of Conduct, which provides a framework for our actions and is the foundation of our partnership with TTC stakeholders—customers, suppliers, shareholders, communities, employees and others.
Our employees are guided further by our global Code of Conduct, which provides a framework for our actions and is the foundation of our partnership with TTC stakeholders—customers, suppliers, shareholders, communities, employees and others.
Engineering, Research and Innovation We believe that our longstanding commitment to innovation and quality in our products has been a key driver of our market success. We are committed to the development of innovative new products and improvements in the quality and performance of existing products.
We are committed to the development of innovative new products and improvements in the quality and performance of existing products.
Accordingly, estimating the number of competitors or precise market share is challenging; however, we believe that we are a principal competitor in most of our industries and markets.
Accordingly, estimating the number of competitors or precise market share is challenging; however, we believe that we are a principal competitor in most of our industries and markets. 10 Table of Contents The principal competitive factors in our markets are product innovation; quality and reliability; pricing and sales programs; product support and customer service; warranty; brand and reputation; channel relationships, shelf space, and product availability; and financing options.
Home solutions products are primarily sold to home centers, mass retailers, and hardware retailers. Internationally, Residential segment products are sold to dealers and mass merchandisers in Australia, Canada, and select countries in Europe. In most other countries, Residential segment products are mainly sold to distributors for resale to dealers and mass retailers. We operate one wholly-owned domestic distribution company.
In certain markets, these 9 Table of Contents same products are sold to distributors for resale to hardware retailers and dealers. Yard tools and garden equipment products are primarily sold to home centers, mass retailers, and hardware retailers. We operate one wholly-owned domestic distribution company.
We provide pricing support to foreign customers, invoice in local currency, and execute foreign currency derivative hedging instruments, as appropriate, to remain competitive in international markets.
We provide pricing support to foreign customers, invoice in local currency, and execute foreign currency derivative hedging instruments, as appropriate, to remain competitive in international markets. Human Capital Resources and Management Guiding Principles and our Purpose, Vision, and Mission As part of our guiding principles, we believe our success is deeply rooted in caring relationships built on trust and integrity.
Our Mission: To deliver superior innovation and to deliver superior customer care. As part of our guiding principles, we believe our success is deeply rooted in caring relationships built on trust and integrity. We believe these relationships are the foundation of our market leadership in innovation and solutions that make outdoor environments beautiful, productive and sustainable.
We believe these relationships are the foundation of our market leadership in innovation and solutions that make outdoor environments beautiful, productive and sustainable. We are committed to fostering a meaningful and enriching culture and engaging employee experience.
The principal competitive factors in our markets are product innovation; quality and reliability; pricing and sales programs; product support and customer service; warranty; brand and reputation; channel relationships, shelf space, and product availability; and financing options. We believe we offer total solutions and full service packages with high quality products that have the latest technology and design innovations.
We believe we offer total solutions and full service packages with high quality products that have the latest technology and design innovations.
Human Capital Resources and Management Our Purpose, Vision, Mission and Guiding Principles We believe our commitment to our human capital resources is key to: Our Purpose: To help our customers enrich the beauty, productivity and sustainability of the land. Our Vision: To be the most trusted leader in solutions for the outdoor environment. Every day. Everywhere.
Our Vision: To be the most trusted leader in solutions for the outdoor environment. Every day. Everywhere. Our Mission: To deliver superior innovation and to deliver superior customer care.
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Business Combination Acquisition of Intimidator Group On January 13, 2022, during the first quarter of fiscal 2022, we acquired the privately held Intimidator Group ("Intimidator").
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The following sections describe our Professional segment products by market. Golf Market We are the only company to offer both equipment and irrigation products for the golf market, and are a market leader in both.
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For information regarding the acquisition of Intimidator, refer to Note 2, Business Combinations and Asset Acquisitions , in the Notes to Consolidated Financial Statements included in Part II, Item 8, "Financial Statements and Supplementary Data," of this Annual Report on Form 10-K.
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These products are mainly sold through distributors and dealers who market and sell to end-customers primarily consisting of landscape contractors, municipalities, and other government entities.
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In fiscal 2023, TTC was recognized for the ninth consecutive year with the WaterSense Excellence Award for our dedication to offering products that are designed to help our customers save water, in addition to other factors, as well as for our excellence in outreach, education, training and public relations.
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We also license our trademark on certain yard tools and garden equipment products as a means of expanding our brand presence. The following sections describe our Residential segment products.
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Landscape contractor turf products are also sold to dealers in certain regions of North America. Snow and ice management products are primarily sold to distributors and dealers for resale to contractors.
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As a result of our international operations, we are exposed to foreign currency exchange rate risk arising from transactions in the normal course of business.
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We are committed to fostering a meaningful and enriching culture and engaging employee experience.
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For example, persistent hot and dry weather patterns or excessive snowfall across key regions may impact the rate at which inventory needs to be replenished either negatively or positively.
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We have transitioned many of our professional development opportunities to virtual delivery options and expanded our offerings for on-demand learning to ensure that robust learning opportunities were still available to our employees who were not required to be physically present at our facilities and sites to perform their job responsibilities.
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The purpose of these agreements is to provide end-users of our products alternative financing options when purchasing our products.
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One such example of a virtual development program is our Engaging Effectively program, which we offer to leaders who are required to manage differently in a remote and hybrid environment, yet still engage and achieve high performance standards with their teams. Health and Wellness The health and wellness of our employees are critical to our success.
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We believe our commitment to employee wellness and environmental stewardship create a sense of community, allowing employees to take pride in their jobs and live the TTC values. We believe our commitment to our human capital resources is key to: Our Purpose: To help our customers enrich the beauty, productivity and sustainability of the land.
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We believe diversity can take the form of visible and known aspects like race, gender, age, and tenure, to less visible or known aspects like country of origin, gender identity, spirituality and more.
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In addition to traditional training, we use safety scorecards, standardized signage, and visual management throughout our facilities.
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To promote DEI in the workplace, our DEI committee is focused on its strategic pillars of nurturing an inclusive workspace, attracting and maintaining a diverse workforce, and impacting the communities and markets in which our employees live and work.
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Inclusion and Belonging Our culture, rooted in excellence, integrity, and belonging, promotes a safe and welcoming environment where all employees can be their authentic self, both at work and beyond. We strive to nurture an inclusive community where everyone thrives – our colleagues, customers, partners, and communities.
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Initiatives developed by our DEI committee include, but are not limited to, events to celebrate heritage and awareness months, a new grant program for advancing equitable communities and the inception of an employee resource group to support women in the workforce.
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Our team members are encouraged to leverage their unique strengths and experiences to address challenges and drive innovation. We celebrate the diverse cultures and backgrounds of those who enrich our world daily. Together, we strive to foster a company culture and industry reputation that embodies collaboration and a genuine sense of belonging for all.
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EPA implementation of Tier 4 emission requirements applicable to diesel engines several years ago, China, the European Union ("EU") and its member states, and the United Kingdom also have adopted similar regulations, and similar emission regulations are also being considered in other global markets, including Australia, in which we sell our products.
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In September 2024, Australian regulators adopted the Treasury Laws Amendment (Financial Market Infrastructure and Other Measures) Bill 2024, which requires large and medium-sized companies to begin reporting on climate-related risks and opportunities, and greenhouse gas (GHG) emissions, in their annual reports for financial years commencing after January 1, 2025. • In March 2024, the SEC adopted rules under SEC Release No. 33-11275, The Enhancement and Standardization of Climate-Related Disclosures for Investors, which requires the disclosure of material Scope 1 and Scope 2 GHG emissions and other climate-related topics in annual reports and registration statements.
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Senate Bill 253 (SB 253) requires that CARM develop and adopt regulations to require the annual disclosure of Scope 1, 2 and 3 GHG emissions, with certain GHG emissions data subject to third party assurance.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeEconomic and Operational Risks • Our net sales and earnings have been and will likely continue to be adversely affected by economic conditions and outlook in the locations in which we conduct business. • If we are unable to enhance existing products and develop and market new products, demand for our products may decrease adversely impacting our net sales and earnings. • Disruption and/or shortages in commodities, components, parts, or accessories has adversely affected and could continue to adversely affect our business. • Weather conditions, including conditions exacerbated by global climate change, present chronic and acute physical risks, and have previously impacted, and may continue to impact, demand for some of our products and/or cause disruptions in our operations. • Our Professional segment net sales are dependent on several factors, including golf, infrastructure and construction activity. • Our Residential segment net sales are dependent on several factors, including product placement, consumer confidence and spending levels and changing customer buying patterns. • Changes in our product mix have adversely impacted and could continue to adversely impact our operating results. • We face intense competition, which could harm our business and operating results. • Increases in the cost of commodities, components, parts, and accessories have adversely affected and could continue to adversely affect our profit margins. • We are dependent upon our facilities and those of our suppliers and other third parties. • We are dependent upon a strong, effective labor force. • Our net sales and other operating results are dependent upon us and our channel customers maintaining appropriate inventory levels. • We are dependent upon our channel customers. • We are dependent upon the availability and terms of credit offered to our customers. • We are dependent upon effective information systems. • Our international operations involve risk. • We experience disruptions to our operations from time to time as result of facility changes and renovations. 15 Table of Contents Strategic Risks • Our strategy to pursue acquisitions and alliances, strong customer relations, and new joint ventures, investments, and partnerships and our recent activities in this regard involve risk and may prove to be unsuccessful. • Increased scrutiny regarding our ESG practices could impact our reputation.
Biggest changeEconomic and Operational Risks • Our net sales and earnings have been and will likely continue to be adversely affected by economic conditions and outlook in the locations in which we conduct business. • If we are unable to enhance existing products and develop and market new products, demand for our products may decrease adversely impacting our net sales and earnings. • Disruption and/or shortages in commodities, components, parts, or accessories has adversely affected and could continue to adversely affect our business. • Weather conditions, including conditions exacerbated by global climate change, present chronic and acute physical risks, and have previously impacted, and may continue to impact, demand for some of our products and/or cause disruptions in our operations. • Our Professional segment net sales are dependent on several factors, including changes to the golf, grounds, irrigation, and construction markets. • Our Residential segment net sales are dependent on several factors, including product placement, consumer confidence and spending levels and changing customer buying patterns. • Changes in our product mix have adversely impacted and could continue to adversely impact our operating results. • We face intense competition, which could harm our business and operating results. • Increases in the cost of commodities, components, parts, and accessories have adversely affected and could continue to adversely affect our profit margins. • We are dependent upon our facilities and those of our suppliers and other third parties. • We are dependent upon a strong, effective labor force. • Our net sales and other operating results are dependent upon us and our channel customers maintaining appropriate inventory levels. • We are dependent upon our channel customers. • We are dependent upon the availability and terms of credit offered to our customers. • We are dependent upon effective information systems. • Our international operations involve risk. • We experience disruptions to our operations from time to time as result of facility changes and renovations. • There are risks associated with the recent U.S. presidential election, including the imposition, or threat of imposition, of additional tariffs.
However, during the past couple of years, we experienced higher material, freight and manufacturing costs, which adversely affected our margins, and we may not be able to fully offset increased commodity, component, parts, or accessories costs in the future.
However, during the past couple of years, we experienced higher material, manufacturing, and freight costs, which adversely affected our margins, and we may not be able to fully offset increased commodity, component, parts, or accessories costs in the future.
As a result of a new SEC rule on cybersecurity disclosure, we are required to disclose, on a current basis pursuant to new Item 1.05 of SEC Form 8-K, any cybersecurity incident that we determine to be material and describe the material aspects of the nature, scope, and timing of the incident, as well as the material impact or reasonably likely material impact of the incident on us, including our financial condition and results of operations.
As a result of the SEC rule on cybersecurity disclosure, we are required to disclose, on a current basis pursuant to new Item 1.05 of SEC Form 8-K, any cybersecurity incident that we determine to be material and describe the material aspects of the nature, scope, and timing of the incident, as well as the material impact or reasonably likely material impact of the incident on us, including our financial condition and results of operations.
These risks include: • weakened economic conditions; • pandemics and/or epidemics; • increased costs of customizing products for foreign countries; • difficulties in managing and staffing international operations and increases in infrastructure costs including legal, tax, accounting, and information technology; • the imposition of additional U.S. and foreign governmental controls or regulations; • new or enhanced trade restrictions and restrictions on the activities of foreign agents, representatives, and channel customers; • withdrawal from or revisions to international trade policies or agreements and the imposition or increases in import and export licensing and other compliance requirements, customs duties and tariffs, import and export quotas and other trade restrictions, license obligations, other non-tariff barriers to trade; • the imposition of U.S. and/or international sanctions against a country, company, person, or entity with whom we do business that would restrict or prohibit our business with the sanctioned country, company, person, or entity; • international pricing pressures; • foreign trade or other policy changes between the U.S. and other countries, trade regulation, and/or industry activity that favors domestic companies, including antidumping and countervailing duty petitions on certain products imported from foreign countries, including certain engines imported into the U.S. from China; • adverse currency exchange rate fluctuations; • longer payment cycles and difficulties in enforcing agreements and collecting receivables through certain foreign legal systems; 22 Table of Contents • potentially higher tax rates and adverse tax consequences, including restrictions on repatriating cash and/or earnings to the U.S.; • fluctuations in our operating performance based on our geographic mix of sales; • transportation delays and interruptions; • national and international conflicts, including the war between Ukraine and Russia, the war between Israel and Hamas, geopolitical tensions and foreign policy changes, acts of war or terrorist acts; • difficulties in protecting, enforcing or defending intellectual property rights; and • multiple, changing, and often inconsistent enforcement of laws, rules, regulations and standards, including rules relating to taxes, environmental, health and safety matters.
These risks include: • weakened economic conditions; • pandemics and/or epidemics; • increased costs of customizing products for foreign countries; • difficulties in managing and staffing international operations and increases in infrastructure costs including legal, tax, accounting, and information technology; • the imposition of additional U.S. and foreign governmental controls or regulations; • new or enhanced trade restrictions and restrictions on the activities of foreign agents, representatives, and channel customers; • withdrawal from or revisions to international trade policies or agreements and the imposition or increases in import and export licensing and other compliance requirements, customs duties and tariffs, import and export quotas and other trade restrictions, license obligations, other non-tariff barriers to trade; • the imposition of U.S. and/or international sanctions against a country, company, person, or entity with whom we do business that would restrict or prohibit our business with the sanctioned country, company, person, or entity; • international pricing pressures; • foreign trade or other policy changes between the U.S. and other countries, trade regulation, and/or industry activity that favors domestic companies, including antidumping and countervailing duty petitions on certain products imported from foreign countries, including certain engines imported into the U.S. from China; • adverse currency exchange rate fluctuations; • longer payment cycles and difficulties in enforcing agreements and collecting receivables through certain foreign legal systems; • potentially higher tax rates and adverse tax consequences, including restrictions on repatriating cash and/or earnings to the U.S.; • fluctuations in our operating performance based on our geographic mix of sales; • transportation delays and interruptions; • national and international conflicts, including the war between Ukraine and Russia, the war between Israel and Hamas, geopolitical tensions and foreign policy changes, acts of war or terrorist acts; • difficulties in protecting, enforcing or defending intellectual property rights; and • multiple, changing, and often inconsistent enforcement of laws, rules, regulations and standards, including rules relating to taxes, environmental, health and safety matters.
Our Professional segment includes a variety of products that are sold by distributors or dealers, or directly to government customers, rental companies, construction companies, professional and other users, including homeowners, engaged in maintaining and creating properties and landscapes, such as golf courses, sports fields, residential and commercial properties and landscapes, and governmental and municipal properties.
Our Professional segment includes a variety of products that are sold by distributors or dealers, or directly to government customers, rental companies, professional and other users, including homeowners, engaged in maintaining and creating properties and landscapes, such as golf courses, sports fields, residential and commercial properties and landscapes, and governmental and municipal properties.
Whether we achieve our goals and objectives of such initiatives can vary due to a number of factors, including the risk factors described in this Annual Report on Form 10-K. It is possible that we may be unsuccessful in the achievement of our goals, on a timely basis or at all.
Whether we achieve our goals and objectives of such initiatives can vary due to several factors, including the risk factors described in this Annual Report on Form 10-K. It is possible that we may be unsuccessful in the achievement of our goals, on a timely basis or at all.
We have incurred significant costs in an effort to detect and prevent security breaches and incidents, and we may face increased costs and requirements to expend substantial resources in the event of an actual or perceived security breach or incident and to comply with this new SEC cybersecurity rule.
We have incurred significant costs in an effort to detect and prevent security breaches and incidents, and we may face increased costs and requirements to expend substantial resources in the event of an actual or perceived security breach or incident and to comply with the SEC cybersecurity rule.
Financial Risks • We incur impairment, restructuring, and other charges from time to time which harm our operating results. • Foreign currency exchange rate fluctuations may harm our operating results. • We are dependent upon the availability and cost of our credit arrangements and any downgrade in our credit ratings could adversely affect our access to and increase the cost of such arrangements. • Changes in accounting or tax standards and policies and/or assumptions underlying estimates could harm our results of operations.
Financial Risks • We incur impairment, restructuring, and other charges from time to time which harm our operating results. • Foreign currency exchange rate fluctuations may harm our operating results. • We are dependent upon the availability and cost of our credit arrangements and any downgrade in our credit ratings could adversely affect our access to and increase the cost of such arrangements. 15 Table of Contents • Changes in accounting or tax standards and policies and/or assumptions underlying estimates could harm our results of operations.
For additional information regarding our accounting policies and new accounting pronouncements, refer to Part II, Item 7, "Management's Discussion and Analysis of Financial Condition and Results of Operations," in the section entitled "Critical 26 Table of Contents Accounting Policies and Estimates" and Note 1, Summary of Significant Accounting Policies and Related Data, of the Notes to Consolidated Financial Statements included in Part II, Item 8, “Financial Statements and Supplementary Data,” of this Annual Report on Form 10-K.
For additional information regarding our accounting policies and new accounting pronouncements, refer to Part II, Item 7, "Management's Discussion and Analysis of Financial Condition and Results of Operations," in the section entitled "Critical Accounting Policies and Estimates" and Note 1, Summary of Significant Accounting Policies and Related Data, of the Notes to Consolidated Financial Statements included in Part II, Item 8, “Financial Statements and Supplementary Data,” of this Annual Report on Form 10-K.
However, the security measures we have implemented may not be effective and our systems may be vulnerable to theft, loss, damage, and interruption from a number of potential sources and events, including unauthorized access or security breaches, data privacy breaches, natural or man-made disasters, cyber attacks, computer viruses, malware, phishing, denial of service attacks, power loss, or other disruptive events.
However, the security measures we have implemented may not be effective and our systems may be 20 Table of Contents vulnerable to theft, loss, damage, and interruption from a number of potential sources and events, including unauthorized access or security breaches, data privacy breaches, natural or man-made disasters, cyber attacks, computer viruses, malware, phishing, denial of service attacks, power loss, or other disruptive events.
Any one or a combination of the following factors, among others, have in the past resulted and could in the future result in a decrease in spending and demand for our products, resulting in an adverse effect on our Professional segment net sales and earnings: • reduced revenue for golf courses resulting from a reduction in the level of interest in the game of golf and/or a decrease in rounds played, memberships, and/or food and beverage sales, as applicable; • reduced investment in golf course renovations and improvements; • the level of new golf course development and golf course closures; • reduced consumer and business spending on property maintenance, such as lawn care and snow and ice removal activities; • low or reduced levels of infrastructure improvements and other construction activities; • decreased oil and gas construction activities; • a decline in acceptance of, and demand for, ag-irrigation solutions for agricultural production; • availability of cash or credit on acceptable terms for our customers to finance new product purchases; and • customer and/or government budgetary constraints resulting in reduced spending for grounds maintenance or construction equipment.
Any one or a combination of the following factors, among others, have in the past resulted and could in the future result in a decrease in spending and demand for our products, resulting in an adverse effect on our Professional segment net sales and earnings: • reduced revenue for golf courses resulting from a reduction in the level of interest in the game of golf and/or a decrease in rounds played, memberships, and/or food and beverage sales, as applicable; • reduced investment in golf course renovations and improvements; • the level of new golf course development and golf course closures; • reduced consumer and business spending on property maintenance, such as lawn care and snow and ice removal activities; 17 Table of Contents • low or reduced levels of infrastructure improvements and other construction activities; • decreased construction activities for oil, gas, telecommunication, and other utility distribution systems; • a decline in acceptance of, and demand for, ag-irrigation solutions for agricultural production; • availability of cash or credit on acceptable terms for our customers to finance new product purchases; and • customer and/or government budgetary constraints resulting in reduced spending for grounds maintenance or construction equipment.
We also set goals and objectives for the timing of certain accomplishments, initiatives and milestones regarding our business or operating results, including without limitation our recently announced "Amplifying Maximum Productivity" or AMP initiative, which is a multi-year initiative intended to result in annualized cost savings of more than $100 million by fiscal 2027, driven by sustainable supply-base, design-to-value, and route-to-market transformation.
We also set goals and objectives for the timing of certain accomplishments, initiatives and milestones regarding our business or operating results, including without limitation our "Amplifying Maximum Productivity" or AMP initiative, which is a multi-year productivity initiative intended to result in annualized cost savings of more than $100 million by fiscal 2027, driven by sustainable supply-base, design-to-value, route-to-market, and operational efficiency transformation.
Global supply chain disruptions, natural disasters, antidumping and countervailing duty petitions regarding certain engines imported into the U.S. from China, and other tariffs have, to various and differing degrees, impacted the availability of commodities, components, parts, and accessories used in our products.
Global supply chain disruptions, natural disasters, antidumping and countervailing duty petitions regarding certain engines imported into the U.S. from China, and other tariffs have, to various and differing degrees, impacted the availability of 16 Table of Contents commodities, components, parts, and accessories used in our products.
Furthermore, such impacts hinder our ability to meet customer demand, result in the loss of customers, and could cause us to incur charges associated with inventory valuation adjustments for excess and obsolete inventories. Our business and operating results are subject to the inventory management decisions of our channel customers.
Furthermore, such impacts hinder our ability 19 Table of Contents to meet customer demand, result in the loss of customers, and could cause us to incur charges associated with inventory valuation adjustments for excess and obsolete inventories. Our business and operating results are subject to the inventory management decisions of our channel customers.
Further, the failure of one or more counterparties to our foreign currency exchange rate contracts to fulfill their obligations to us could adversely affect our operating results. 25 Table of Contents We are subject to financial and operating restrictions and counterparty risk as a result of our credit arrangements.
Further, the failure of one or more counterparties to our foreign currency exchange rate contracts to fulfill their obligations to us could adversely affect our operating results. We are subject to financial and operating restrictions and counterparty risk as a result of our credit arrangements.
A recall of some of our products could also result in increased 28 Table of Contents product liability claims. Unforeseen product quality and/or product liability problems in the development and production of new and existing products could also result in loss of market share, decreased demand, reduced sales, rework costs, and higher warranty expense.
A recall of some of our products could also result in increased product liability claims. Unforeseen product quality and/or product liability problems in the development and production of new and existing products could also result in loss of market share, decreased demand, reduced sales, rework costs, and higher warranty expense.
In connection with our acquisitions and other business combinations, including our January 2022 acquisition of Intimidator, applicable accounting standards require the net tangible and intangible assets of the acquired business to be recorded on our consolidated balance sheet at their fair values as of the date of acquisition and any excess in the purchase price paid by us over the fair value of net tangible and intangible assets of any acquired business to be recorded as goodwill.
In connection with our acquisitions and other business combinations, applicable accounting standards require the net tangible and intangible assets of the acquired business to be recorded on our consolidated balance sheet at their fair values as of the date of acquisition and any excess in the purchase price paid by us over the fair value of net tangible and intangible assets of any acquired business to be recorded as goodwill.
Acquisitions, alliances, joint ventures, investments, and partnerships may involve a number of risks, the occurrence of which could adversely affect our business, reputation, financial condition, and operating results, including: • diversion of management's attention to manage and integrate the acquired business; • disruption to our existing operations and plans; • inability to effectively manage our expanded operations; • difficulties, delays, or unanticipated costs in integrating and assimilating information and financial systems, internal controls, operations, manufacturing processes and products or in realizing projected efficiencies, growth prospects, cost savings, and other synergies; • inability to successfully integrate or develop a distribution channel for acquired product lines; • loss of key employees, customers, distributors, or dealers of the acquired businesses or adverse effects on existing business relationships with suppliers, customers, distributors, and dealers; • write-off of significant amounts of goodwill, other indefinite-lived intangible assets, and/or long-lived assets because of deterioration in the performance of an acquired business or product line, adverse market conditions, changes in the competitive landscape, changes in laws or regulations that restrict activities of an acquired business or product line, or other circumstances; • delays or challenges in transitioning distributors and dealers of acquired businesses to available floor plan financing arrangements; • violation of confidentiality, intellectual property, and non-compete obligations or agreements by employees of an acquired business or lack of or inadequate formal intellectual property protection mechanisms in place at an acquired business; 23 Table of Contents • adverse impact on overall profitability if our expanded operations do not achieve, or are delayed in achieving, the growth prospects, net sales, net earnings, cost and/or revenue synergies, or other financial results projected in our valuation models; • reallocation of amounts of capital from other operating initiatives and/or an increase in our leverage and debt service requirements to pay acquisition purchase prices or other business venture investment costs, which could restrict our ability to access additional capital when needed, result in a decrease in our credit rating, or limit our ability to pursue other important elements of our business strategy; • failure by acquired businesses or other business ventures to comply with applicable international, federal, and state product safety or other regulatory standards; • infringement by acquired businesses or other business ventures of valid intellectual property rights of others; • inaccurate assessment of additional post-acquisition or business venture investments, undisclosed, contingent or other liabilities or problems, unanticipated costs associated with an acquisition or other business venture, and despite the existence of representations, warranties and indemnities in any definitive agreement and/or a representation and warranty insurance policy, if applicable, an inability to recover or manage such liabilities and costs; and • impacts as a result of purchase accounting adjustments, incorrect estimates made in the accounting for acquisitions, occurrence of non-recurring charges, or other potential financial accounting or reporting impacts.
Acquisitions, alliances, joint ventures, investments, and partnerships may involve a number of risks, the occurrence of which could adversely affect our business, reputation, financial condition, and operating results, including: • diversion of management's attention to manage and integrate the acquired business; • disruption to our existing operations and plans; • inability to effectively manage our expanded operations; • difficulties, delays, or unanticipated costs in integrating and assimilating information and financial systems, internal controls, operations, manufacturing processes and products or in realizing projected efficiencies, growth prospects, cost savings, and other synergies; • inability to successfully integrate or develop a distribution channel for acquired product lines; • loss of key employees, customers, distributors, or dealers of the acquired businesses or adverse effects on existing business relationships with suppliers, customers, distributors, and dealers; • write-off of significant amounts of goodwill, other indefinite-lived intangible assets, and/or long-lived assets because of deterioration in the performance of an acquired business or product line, adverse market conditions, changes in the competitive landscape, changes in laws or regulations that restrict activities of an acquired business or product line, or other circumstances; • delays or challenges in transitioning distributors and dealers of acquired businesses to available floor plan financing arrangements; • violation of confidentiality, intellectual property, and non-compete obligations or agreements by employees of an acquired business or lack of or inadequate formal intellectual property protection mechanisms in place at an acquired business; • adverse impact on overall profitability if our expanded operations do not achieve, or are delayed in achieving, the growth prospects, net sales, net earnings, cost and/or revenue synergies, or other financial results projected in our valuation models; • reallocation of amounts of capital from other operating initiatives and/or an increase in our leverage and debt service requirements to pay acquisition purchase prices or other business venture investment costs, which could restrict our ability to access additional capital when needed, result in a decrease in our credit rating, or limit our ability to pursue other important elements of our business strategy; • failure by acquired businesses or other business ventures to comply with applicable international, federal, and state product safety or other regulatory standards; • infringement by acquired businesses or other business ventures of valid intellectual property rights of others; • inaccurate assessment of additional post-acquisition or business venture investments, undisclosed, contingent or other liabilities or problems, unanticipated costs associated with an acquisition or other business venture, and despite the existence of representations, warranties and indemnities in any definitive agreement and/or a representation and warranty insurance policy, if applicable, an inability to recover or manage such liabilities and costs; and • impacts as a result of purchase accounting adjustments, incorrect estimates made in the accounting for acquisitions, occurrence of non-recurring charges, or other potential financial accounting or reporting impacts. 23 Table of Contents For example, during the third quarter of fiscal 2023, we recorded non-cash impairment charges of $18.0 million related to the indefinite-lived Spartan® trade name intangible asset and $133.3 million related to Intimidator goodwill.
Furthermore, our stakeholders may not be satisfied with our initiatives or efforts or the speed at which we are progressing towards any such 24 Table of Contents aspirations and goals. Additionally, organizations that inform investors on ESG matters have developed rating systems for evaluating companies on their approach to ESG.
Furthermore, our stakeholders may not be satisfied with our initiatives or efforts or the speed at which we are progressing towards any such aspirations and goals. Additionally, organizations that inform investors on ESG matters have developed rating systems for evaluating companies on their approach to ESG.
Our insurance policies may not be adequate to compensate us for the potential losses arising from any such disruption, failure or security breach or incident. In addition, such insurance may not be available to us in the future on economically reasonable terms, or at all.
Our insurance policies may not be adequate to compensate us for the potential losses arising from any such disruption or failure. In addition, such insurance may not be available to us in the future on economically reasonable terms, or at all.
We purchase commodities, components, parts, and accessories for use in our manufacturing process and end-products or to be sold as stand-alone end-products, such as steel, aluminum, petroleum and natural gas-based resins, linerboard, copper, lead, rubber, engines, transmissions, transaxles, hydraulics, electrification components, and other commodities, components, parts and accessories.
We purchase commodities, components, parts, and accessories for use in our manufacturing process and end-products or to be sold as stand-alone end-products, such as steel, aluminum, petroleum and natural gas-based resins, linerboard, copper, lead, rubber, engines, transmissions, transaxles, hydraulics, electrification components, and other commodities, components, parts 18 Table of Contents and accessories.
Our executive management team and board of directors have undergone significant changes during the past two years.
Our executive management team and board of directors have undergone significant changes during the past three years.
New and innovative competitive products may beat our products to market; be higher quality or more reliable; be more effective, have more 16 Table of Contents features, and/or be less expensive than our products; incorporate new, emerging, and/or disruptive technologies; obtain better market acceptance; or render our products obsolete.
New and innovative competitive products may beat our products to market; be higher quality or more reliable; be more effective, have more features, and/or be less expensive than our products; incorporate new, emerging, and/or disruptive technologies; obtain better market acceptance; or render our products obsolete.
In addition, competition could increase if new companies enter the market, existing 18 Table of Contents competitors combine or consolidate their operations or if existing competitors expand their product lines or intensify efforts within existing product lines.
In addition, competition could increase if new companies enter the market, existing competitors combine or consolidate their operations or if existing competitors expand their product lines or intensify efforts within existing product lines.
An example of such legislation is California's AB 1346, which will require most new sales of small off-road engines, such as those installed in certain of our products, including leaf blowers and lawnmowers, sold in the state of California on or after January 1, 2024 to be zero-emission.
An example of such legislation is California's AB 1346, requires that most new sales of small off-road engines, such as those installed in certain of our products, including leaf blowers and lawnmowers, sold in the state of California on or after January 1, 2024 must be zero-emission.
Our production levels and inventory management goals for our products are based on estimates of demand for our products, taking into account production capacity, timing of shipments, existing sales order backlog, and field inventory levels.
Our production levels and inventory management goals for our products are based on estimates of demand for our products, considering production capacity, timing of shipments, existing sales order backlog, and field inventory levels.
Even if these confidentiality agreements are not breached, our trade secrets may otherwise become known or be independently developed by competitors. We are subject to extensive laws, rules, policies, and regulations, with which our compliance is costly and not guaranteed.
These agreements may be breached, and we may not have adequate remedies for any such breach. Even if these confidentiality agreements are not breached, our trade secrets may otherwise become known or be independently developed by competitors. We are subject to extensive laws, rules, policies, and regulations, with which our compliance is costly and not guaranteed.
As of October 31, 2023, we had goodwill of $450.8 million, which is maintained in various reporting units, and indefinite-lived intangible assets of $271.5 million, which together comprise 19.8 percent of our total assets as of October 31, 2023. Any future impairment charges could be significant and could adversely affect our future consolidated operating results and financial condition.
As of October 31, 2024, we had goodwill of $450.3 million, which is maintained in various reporting units, and indefinite-lived intangible assets of $271.6 million, which together comprise 20.1 percent of our total assets as of October 31, 2024. Any future impairment charges could be significant and could adversely affect our future consolidated operating results and financial condition.
Indefinite-lived intangible assets are tested for impairment at the individual indefinite-lived intangible asset or asset group level, as appropriate.
Indefinite-lived intangible 24 Table of Contents assets are tested for impairment at the individual indefinite-lived intangible asset or asset group level, as appropriate.
For instance, if our credit rating falls below investment grade and/or our leverage ratio rises above 1.50, the interest rate we currently pay on outstanding debt under our revolving credit facility could increase.
Further leveraging our capital structure could result in a downgrade to our credit ratings. For instance, if our credit rating falls below investment grade and/or our leverage ratio rises above 1.50, the interest rate we currently pay on outstanding debt under our revolving credit facility could increase.
One of our strategies is to drive growth in our businesses and expand our global presence through targeted acquisitions and alliances, strong customer relations, and new joint ventures, investments, and partnerships that add value and complement our existing brands and product portfolio.
One of our strategies is to drive growth in our businesses and expand our global presence through targeted acquisitions and alliances, strong customer relations, and new joint ventures, investments, and partnerships that add value and complement our existing brands and product portfolio. For example, in September 2023, we announced a strategic partnership with Lowe's.
If the content, analyses, or recommendations that AI programs assist in producing are or are alleged to be deficient, inaccurate, or biased, our business, financial condition, and results of operations and our reputation may be adversely affected.
If the content, analyses, or recommendations that AI programs assist in producing are or are alleged to be deficient, inaccurate, or biased, our business, financial condition, and results of operations and our reputation may be adversely affected. AI programs may be costly and require significant expertise to develop, may be difficult to set up and manage, and require periodic upgrades.
Our international operations may not produce desired levels of net sales or, among other things, the factors listed above may harm our business and operating results. Any material decrease in our international sales or profitability could also adversely impact our operating results.
Our international operations may not produce desired levels of net sales or, among other things, the factors listed above may harm our business and operating results.
Additionally, market deterioration or other factors could jeopardize the counterparty obligations of one or more of the banks participating in our revolving credit facility, which could have an adverse effect on our business if we are not able to replace such revolving credit facility or find other sources of liquidity on acceptable terms.
Additionally, market deterioration or other factors could jeopardize the counterparty obligations of one or more of the banks participating in our revolving credit facility, which could have an adverse effect on our business if we are not able to replace such revolving credit facility or find other sources of liquidity on acceptable terms. 25 Table of Contents If we do not comply with the terms of our credit arrangements and indentures, they could be terminated and amounts thereunder could become due and payable.
Any material change in the availability or terms of credit offered to our customers by our floor plan financing providers, challenges or delays in transferring new distributors and dealers from any business we might acquire or otherwise to our available financing platforms, any termination or disruption of our floor plan arrangements, or any delay in securing replacement credit sources could adversely affect our sales and operating results. 20 Table of Contents We are dependent upon the effective operation of our information systems, software, or information security practices and those of our business partners or third-party service providers.
Any material changes in the availability or terms of credit offered to our customers by our floor plan financing providers, challenges or delays in transferring new distributors and dealers from any business we might acquire or otherwise to our available financing platforms, any termination or disruption of our floor plan arrangements, or any delay in securing replacement credit sources could adversely affect our sales and operating results.
In addition, due to limited workforce populations in areas around the locations where we, or our suppliers and channel partners, manufacture products or conduct business, or other factors, we, or our suppliers and channel partners, may not have a sufficient pool of individuals with the right skills and experience available to fulfill labor requirements on a cost-effective basis or otherwise. 19 Table of Contents For example, our labor needs and those of our suppliers and channel partners were negatively impacted by COVID-19, which exacerbated the challenges in retaining and maintaining an adequate production staff.
In addition, due to limited workforce populations in areas around the locations where we, or our suppliers and channel partners, manufacture products or conduct business, or other factors, we, or our suppliers and channel partners, may not have a sufficient pool of individuals with the right skills and experience available to fulfill labor requirements on a cost-effective basis or otherwise.
These financial projections are based on management’s assumptions and expectations at the time made. Failure to achieve our financial projections could have an adverse effect on our business, operating results, and financial condition.
We generally provide financial projections such as our expected revenue growth and adjusted diluted earnings per share. These financial projections are based on management’s assumptions and expectations at the time made. Failure to achieve our financial projections could have an adverse effect on our business, operating results, and financial condition.
Others may initiate litigation to challenge the validity of our patents, allege that we infringe their patents, or use their resources to design comparable products that do not infringe our patents. Additionally, we may initiate proceedings to protect our proprietary rights. Any litigation, whether initiated by us or others, may cause us to incur substantial costs and possible damages.
Others may initiate litigation to challenge the validity of our patents, allege that we infringe their 26 Table of Contents patents, or use their resources to design comparable products that do not infringe our patents. Additionally, we may initiate proceedings to protect our proprietary rights.
Such weather conditions could pose physical risks to our facilities and critical infrastructure in the U.S. and abroad, disrupt the operation of our supply chain and third-party vendors, and may impact our operational results.
Such weather conditions could pose physical risks to our facilities and critical infrastructure in the U.S. and abroad, disrupt the operation of our supply chain and third-party vendors, and may impact our operational results. Additionally, increased frequency and intensity of weather events due to climate change could lead to lost sales as customers prioritize basic needs.
We have many information systems and other software that are critical to our business and certain of our products, some of which are managed by third parties.
We are dependent upon the effective operation of our information systems, software, or information security practices and those of our business partners or third-party service providers. We have many information systems and other software that are critical to our business and certain of our products, some of which are managed by third parties.
We are currently subject to rules limiting exhaust and other emissions and other climate-related rules and regulations in certain jurisdictions where we operate. Concern over climate change has resulted in, and could continue to result in, new legal or regulatory requirements designed to reduce or mitigate the effects of greenhouse gases.
Concern over climate change has resulted in, and could continue to result in, new legal or regulatory requirements designed to reduce or mitigate the effects of greenhouse gases.
Significant violations of these laws, or allegations of such violations, could harm our reputation, disrupt our business, and result in significant fines and penalties that could have a material adverse effect on our operating results or financial condition.
Significant violations of these laws, or allegations of such violations, could harm our reputation, disrupt our business, and result in significant fines and penalties that could have a material adverse effect on our operating results or financial condition. 28 Table of Contents General Risk Factors We may not achieve our financial projections, sustainability goals, or other business and productivity initiatives, which could have an adverse effect on our business, operating results, and financial condition.
If such laws or regulations are more stringent than current legal or regulatory requirements, we may be subject to curtailment or reduced access to resources or experience increased compliance burdens and costs to meet the regulatory obligations, which may adversely affect our business and operating results.
If such laws or regulations are more stringent than current legal or regulatory requirements, we may be subject to curtailment or reduced access to resources or experience increased compliance burdens and costs to meet the regulatory obligations, which may adversely affect our business and operating results. 27 Table of Contents Additionally, various other legislative proposals, if enacted, could put us in a competitively advantaged or disadvantaged position and affect customer demand for our products.
The banks could condition such waiver on terms that may be unfavorable to us. In addition, any amounts outstanding pursuant to our credit arrangements and indentures could become due and payable if we were unable to obtain a covenant waiver or refinance our debt under such arrangements.
In addition, any amounts outstanding pursuant to our credit arrangements and indentures could become due and payable if we were unable to obtain a covenant waiver or refinance our debt under such arrangements. A downgrade in our credit ratings could increase our cost of funding and/or adversely affect our access to funding.
This evaluation is based on a number of factors, which include financial strength, business and financial risk, transparency with rating agencies, and timeliness of financial reporting. Further leveraging our capital structure could result in a downgrade to our credit ratings.
Our credit ratings are important to our cost and availability of capital. The major rating agencies routinely evaluate our credit profile and assign credit ratings to us. This evaluation is based on a number of factors, which include financial strength, business and financial risk, transparency with rating agencies, and timeliness of financial reporting.
Other Laws impacting our supply chain, such as the United Kingdom Modern Slavery Act, or data privacy requirements, such as the EU's General Data Protection Regulation, the California Consumer Privacy Act, and other emerging domestic and global data privacy and cybersecurity laws, may have similar consequences. 27 Table of Contents Climate change legislation, regulations, accords, mitigation efforts, or other legislation may adversely impact our operations and could impact the competitive landscape within our markets and affect demand for our products.
Other Laws impacting our supply chain, such as the United Kingdom Modern Slavery Act, or data privacy requirements, such as the EU's General Data Protection Regulation, the California Consumer Privacy Act, and other emerging domestic and global data privacy and cybersecurity laws, may have similar consequences.
For example, at the end of the third quarter of fiscal 2023, we recorded non-cash impairment charges of $18.0 million related to the indefinite-lived Spartan® trade name intangible asset and $133.3 million related to the goodwill of the Intimidator reporting unit.
For example, during the third quarter of fiscal 2023, we recorded non-cash impairment charges of $18.0 million related to the indefinite-lived Spartan trade name intangible asset and $133.3 million related to Intimidator goodwill. These impairment charges resulted in a $36.7 million income tax benefit (deferred tax asset) associated with the remaining tax deductible basis in goodwill and other intangible assets.
Our ability to comply with such terms depends on the success of our business and our operating results, as well as various risks, uncertainties, and events beyond our control. If we fail to comply with any covenant required by our credit arrangements following any applicable cure periods, the banks could terminate their commitments unless we could negotiate a covenant waiver.
If we fail to comply with any covenant required by our credit arrangements following any applicable cure periods, the banks could terminate their commitments unless we could negotiate a covenant waiver. The banks could condition such waiver on terms that may be unfavorable to us.
We currently manufacture our products and maintain sales offices in the U.S. and other countries for sale throughout the world. Our net sales outside the U.S. were 20.8 percent, 19.5 percent, and 20.9 percent of our total consolidated net sales for fiscal 2023, 2022, and 2021, respectively.
Our net sales outside the U.S. were 20.1 percent, 20.8 percent, and 19.5 percent of our total consolidated net sales for fiscal years 2024, 2023, and 2022, respectively.
We are renovating and expanding certain office, manufacturing, and other facilities and could experience disruptions to our operations in connection with such efforts. We are continually renovating and, where appropriate or necessary, expanding our facilities, primarily driven by the growth of our business and the need to expand our manufacturing capacity.
We are continually renovating and, where appropriate or necessary, expanding our facilities, primarily driven by the growth of our business and the need to expand our manufacturing capacity. We have historically financed, and expect to continue to finance, such efforts with cash on hand and cash from operating activities.
Our international operations require significant management attention and financial resources, expose us to difficulties presented by international economic, political, legal, regulatory, accounting, and business factors, and may not be successful or produce desired levels of net sales and earnings. International markets have been, and will continue to be, a strategic focus area for revenue growth, both organically and through acquisitions.
For additional information regarding the company's cybersecurity risk management, strategy, and governance, refer to Item 1C. Cybersecurity. 21 Table of Contents Our international operations require significant management attention and financial resources, expose us to difficulties presented by international economic, political, legal, regulatory, accounting, and business factors, and may not be successful or produce desired levels of net sales and earnings.
If the outcome of any such litigation is unfavorable to us, our business, operating results, and financial condition could be adversely affected. We could also be forced to develop an alternative that could be costly and time-consuming, or acquire a license, which we might not be able to do on terms favorable to us, or at all.
We could also be forced to develop an alternative that could be costly and time-consuming, or acquire a license, which we might not be able to do on terms favorable to us, or at all. We rely on trade secrets and proprietary know-how that we seek to protect, in part, by confidentiality agreements with our employees, suppliers, consultants, and others.
If we do not comply with the terms of our credit arrangements and indentures, they could be terminated and amounts thereunder could become due and payable. We cannot assure that we will be able to comply with all of the terms of our credit arrangements and indentures, particularly the financial covenants.
We cannot assure that we will be able to comply with all of the terms of our credit arrangements and indentures, particularly the financial covenants. Our ability to comply with such terms depends on the success of our business and our operating results, as well as various risks, uncertainties, and events beyond our control.
Additionally, increased frequency and intensity of weather events due to climate change could lead to lost sales as customers prioritize basic needs. 17 Table of Contents Our Professional segment includes a variety of products that depend on certain and varied factors.
Our Professional segment includes a variety of products that depend on certain and varied factors.
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For example, after the COVID-19 pandemic, consumers have shifted more of their spending away from home related products, including our Residential segment products, and back to other areas, compared to the historic levels of home related spending we experienced during the heights of the pandemic, which has adversely affected and may continue to adversely affect our Residential net sales.
Added
Strategic Risks • Our strategy to pursue acquisitions and alliances, strong customer relations, and new joint ventures, investments, and partnerships and our recent activities in this regard involve risk and may prove to be unsuccessful. • Climate, environmental, health and safety laws and regulations as well as the impact of increased scrutiny on our environmental, social and governance (“ESG”) practices, our ability to meet our ESG company goals, and public perceptions that our products are not environmentally friendly or that our practices are not sustainable could impact our reputation. • Stock price volatility, including in response to the risks described herein or for reasons unrelated to our operations, such as reports by industry analysts, investor perceptions or negative announcements by our customers, competitors or suppliers regarding their own performance, as well as industry or general economic conditions, and other factors beyond our control. • There are risks associated with our ability to achieve our financial projections or other business initiatives, including our Amplifying Maximum Productivity (“AMP”) initiative, in the time periods that we anticipate or at all.
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AI programs may be costly and require significant expertise 21 Table of Contents to develop, may be difficult to set up and manage, and require periodic upgrades.
Added
International markets have been, and will continue to be, a strategic focus area for revenue growth, both organically and through acquisitions. We currently manufacture our products and maintain sales offices in the U.S. and other countries for sale throughout the world.
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We have historically financed, and expect to continue to finance, such efforts with cash on hand and cash from operating activities.
Added
Any material decrease in our international sales or profitability could also adversely impact our operating results. 22 Table of Contents We are renovating and expanding certain office, manufacturing, and other facilities and could experience disruptions to our operations in connection with such efforts.
Removed
For example, in January 2022, we acquired the Intimidator Group, and in September 2023, we announced a strategic partnership with Lowe's.
Added
Any litigation, whether initiated by us or others, may cause us to incur substantial costs and possible damages. If the outcome of any such litigation is unfavorable to us, our business, operating results, and financial condition could be adversely affected.
Removed
For example, at the end of the third quarter of fiscal 2023, we recorded non-cash impairment charges of $18.0 million related to the indefinite-lived Spartan trade name intangible asset and $133.3 million related to the goodwill of the Intimidator reporting unit.
Added
Climate change legislation, regulations, accords, mitigation efforts, or other legislation may adversely impact our operations and could impact the competitive landscape within our markets and affect demand for our products. We are currently subject to rules limiting exhaust and other emissions and other climate-related rules and regulations in certain jurisdictions where we operate.
Removed
These impairment charges resulted in a $36.7 million income tax benefit (deferred tax asset) associated with the remaining tax deductible basis in goodwill and other intangible assets.
Removed
A downgrade in our credit ratings could increase our cost of funding and/or adversely affect our access to funding. Our credit ratings are important to our cost and availability of capital. The major rating agencies routinely evaluate our credit profile and assign credit ratings to us.
Removed
We rely on trade secrets and proprietary know-how that we seek to protect, in part, by confidentiality agreements with our employees, suppliers, consultants, and others. These agreements may be breached, and we may not have adequate remedies for any such breach.
Removed
Additionally, various other legislative proposals, if enacted, could put us in a competitively advantaged or disadvantaged position and affect customer demand for our products.
Removed
General Risk Factors We may not achieve our financial projections, sustainability goals, or other business and productivity initiatives, which could have an adverse effect on our business, operating results, and financial condition. We generally provide financial projections such as our expected revenue growth and adjusted diluted earnings per share.
Removed
ITEM 1B. UNRESOLVED STAFF COMMENTS None. ITEM 1C. CYBERSECURITY Not applicable. 29 Table of Contents

Item 1C. Cybersecurity

Cybersecurity — threats and controls disclosure

0 edited+24 added−1 removed0 unchanged
Removed
ITEM 1C. Cybersecurity 29 ITEM 2. Properties 30 ITEM 3. Legal Proceedings 30 ITEM 4. Mine Safety Disclosures 30 Information About Our Executive Officers 31 PART II ITEM 5. Market for Registrant's Common Equity, Related Stockholder Matters, and Issuer Purchases of Equity Securities 32 The Toro Company Common Stock Comparative Performance Graph 33
Added
ITEM 1C. CYBERSECURITY Cybersecurity Risk Management and Strategy To protect the confidentiality, integrity, and availability of our critical systems and information, our enterprise risk management framework considers cybersecurity risk alongside other company risks, as part of our overall risk assessment process.
Added
We leverage an industry leading framework, the National Institute of Standards and Technology Cybersecurity Framework, which organizes cybersecurity risks into five categories: identify, protect, detect, respond and recover. We assess our maturity against that framework in partnership with an independent firm on at least an annual basis.
Added
We assess and manage our cybersecurity risk using various mechanisms, starting with threat intelligence, which provides us a necessary viewpoint to help us identify trends, understand how certain attacks may affect us, and prepare for evolutions in threat actor behavior that may require changes to our security posture.
Added
We monitor emerging trends and regulations related to information security, and implement appropriate changes, as needed, to our cybersecurity risk management program.
Added
To drive readiness, we perform periodic adversarial testing of our cybersecurity posture through penetration testing, using both internal resources and external expertise, as well as table-top and “red team” exercises to understand where processes or controls may be insufficient based on adversarial techniques.
Added
We have also implemented technical security controls, maintenance of certain backup and protective systems, physical and system securities measures, and data security protocols.
Added
We maintain established information security policies and processes; deploy regular network and endpoint software updates on all company-managed systems and workstations to detect and prevent, among others, viruses, malicious code, unauthorized access, and phishing attempts; maintain a disaster recovery plan, and perform at least two disaster recovery exercises annually to validate and optimize our recovery efforts in event of a cybersecurity incident; and regularly engage third-party cybersecurity experts to conduct vulnerability assessments and penetration testing on our information networks, systems, and applications. 29 Table of Contents Our internal audit team performs regular assessments of our program and selected components.
Added
We also leverage retrospectives from previous cybersecurity incidents to understand weaknesses and to improve our security controls. We assess our critical suppliers regularly for cybersecurity risk and prescribe remediation activities when necessary. As a part of a collaborative defense approach, we regularly participate in multiple cybersecurity forums to share threat intelligence, best practices, and points of caution.
Added
We train our employees through annual security training, phishing simulations, and regular communications about timely cybersecurity topics and threats. We have a documented and well-tested cybersecurity incident response plan that guides us in responding, containing, and eradicating cybersecurity threats that have breached our preventative controls.
Added
Examples of relevant processes include steps for: assessing the severity of a cybersecurity threat; identifying the source of a cybersecurity threat, including whether the cybersecurity threat is associated with a third-party service provider; implementing cybersecurity countermeasures and mitigation strategies; and remediating and escalating cybersecurity incidents using cross-functional expertise.
Added
Our cybersecurity risk management program also includes risk-based processes related to overseeing and identifying cybersecurity risks associated with the use of third-party providers, including processes related to: conducting cybersecurity assessments of third-party service providers, including cybersecurity obligations in contract with third-party service providers; and receiving and responding to notification of cybersecurity incidents of third-party service providers.
Added
We regularly practice technical recovery. Cybersecurity risks related to third-party IT providers and solutions are managed as part of our vendor security protocol that includes vendors, software, and cloud-based service providers. We partner with our vendors to minimize the customer data needed to provide services and ensure compliance with regulations.
Added
Vendors are reviewed annually to identify any changes to services, data requirements, and associated security and protections. Where applicable, vendors are contractually bound to protect customer data and support enforcement of all regulatory requirements.
Added
We proactively evaluate the cybersecurity risk of third-party IT providers and solutions by utilizing a repository of risk assessments and an external monitoring solution that includes threat intelligence to better inform us during contracting and vendor selection processes.
Added
When third-party risks are identified, we require those third-parties to agree by contract to implement appropriate security controls or refrain from doing business with them. Security issues are documented, tracked, and periodic monitoring is conducted for third-parties in order to mitigate risk.
Added
The Company also contractually requires suppliers, vendors and other third-parties with access to its information technology systems, sensitive business data or personal information to implement and maintain appropriate security controls and contractually restricts their ability to use the Company’s data, including personal information, for purposes other than to provide services to the Company, except as required by law.
Added
Cybersecurity Governance Our cybersecurity program is led by the Senior Manager of our Enterprise IT Security Risk and Compliance team, who reports to the Managing Director of Enterprise IT. The Senior Manager has over 30 years of IT experience, with over 20 years specializing in cybersecurity.
Added
He has strategic and operational responsibility for all aspects of the company’s cybersecurity program, including how cyber risks are identified and assessed and how the company prepares for, detects, responds, and recovers from cyber threats. Quarterly cybersecurity program updates and as-needed reporting on cybersecurity incidents are provided to the Chief Executive Officer, Chief Financial Officer, and General Counsel.
Added
The Audit Committee of our Board of Directors provides oversight for our cybersecurity program. The Audit Committee receives regular updates from management on the effectiveness of our cybersecurity program, reviews plans on how management will continually advance the program, and receives updates on special topics that help the committee provide effective oversight of the program.
Added
Despite our best efforts, we cannot guarantee that our security measures will prevent all potential cybersecurity incidents or breaches. Like most companies, our systems are continually subjected to sophisticated and evolving cybersecurity threats, such as phishing, ransomware, social engineering, and advanced persistent threats.
Added
However, to date, we have not been subject to any incidents or successful cyber-attacks that materially impacted our operations or financial condition. Vulnerabilities could lead to significant additional expenses and an adverse effect on our reputation, business, results of operations, financial condition and cash flows.
Added
The Company has invested in developing and acquiring cybersecurity capabilities allowing us to monitor threats and manage incident response. We have also developed internal policies to mitigate cybersecurity incidents, including providing clear guidelines for incident classification and response.
Added
We recognize the importance of continued monitoring and improvement of our cybersecurity program, and will continue to invest in our security controls, incident response capabilities, and third-party vendor management protocols.
Added
Additional information on cybersecurity risks we face is included in Part I, Item 1A, "Risk Factors," which should be read in conjunction with the information in this section. 30 Table of Contents

Item 2. Properties

Properties — owned and leased real estate

1 edited+0 added−0 removed3 unchanged
Biggest changeOur significant facilities are listed below by location, ownership, and function as of October 31, 2023: Location Reportable Segment Facility Type/Use Ownership United States: Batesville, Arkansas Professional Manufacturing facility, office, and warehouse Owned/Leased El Cajon, California Professional Manufacturing facility and test site Owned/Leased Riverside, California Professional Office and test site Owned/Leased Sanford, Florida Professional Manufacturing facility Leased Ankeny, Iowa Professional & Residential Distribution center Leased Mount Sterling, Kentucky Professional Manufacturing facility Leased Iron Mountain, Michigan Professional Manufacturing facility, office, and test site Owned/Leased Bloomington, Minnesota Other activities Corporate headquarters and test site Owned/Leased Shakopee, Minnesota Professional & Residential Manufacturing facility Owned Windom, Minnesota Professional & Residential Manufacturing facility Owned/Leased Beatrice, Nebraska Professional Manufacturing facility, office, and test site Owned/Leased Orrville, Ohio Professional Manufacturing facility and office Owned West Salem, Ohio Professional Manufacturing facility and office Owned Perry, Oklahoma Professional Manufacturing facility, office, and test site Owned/Leased El Paso, Texas Professional & Residential Manufacturing facility and distribution center Owned/Leased Weatherford, Texas Professional Manufacturing facility Owned Baraboo, Wisconsin Professional & Residential Distribution center Leased Lake Mills, Wisconsin Professional Manufacturing facility Owned Plymouth, Wisconsin Professional & Residential Distribution center Owned Tomah, Wisconsin Professional Manufacturing facility and distribution center Owned/Leased International Countries: Beverley, Australia Professional Manufacturing facility and office Owned Braeside, Australia Professional & Residential Distribution center Leased Oevel, Belgium Professional & Residential Distribution center Owned/Leased Xiamen City, China Professional & Residential Manufacturing facility Leased Althengstett, Germany Professional Manufacturing facility and office Owned Fiano Romano, Italy Professional Manufacturing facility and office Owned/Leased Juarez, Mexico Professional & Residential Manufacturing facility Leased Monterrey, Mexico Professional & Residential Manufacturing facility Leased Ustron, Poland Professional Manufacturing facility Owned Ploiesti, Romania Professional Manufacturing facility and test site Owned Hertfordshire, United Kingdom Professional & Residential Manufacturing facility, office, and test site Owned
Biggest changeOur significant facilities are listed below by location, ownership, and function as of October 31, 2024: Location Reportable Segment Facility Type/Use Ownership United States: Batesville, Arkansas Professional Manufacturing facility, office, and warehouse Owned/Leased El Cajon, California Professional Manufacturing facility and test site Owned/Leased Riverside, California Professional Office and test site Owned/Leased Sanford, Florida Professional Manufacturing facility Leased Ankeny, Iowa Professional & Residential Distribution center Leased Mount Sterling, Kentucky Professional Manufacturing facility Leased Iron Mountain, Michigan Professional Manufacturing facility, office, test site, and warehouse Owned/Leased Bloomington, Minnesota Other activities Corporate headquarters, test site, and warehouse Owned/Leased Shakopee, Minnesota Professional & Residential Manufacturing facility Owned Windom, Minnesota Professional & Residential Manufacturing facility Owned/Leased Beatrice, Nebraska Professional Manufacturing facility, office, and test site Owned/Leased Orrville, Ohio Professional Manufacturing facility and office Owned West Salem, Ohio Professional Manufacturing facility and office Owned Perry, Oklahoma Professional Manufacturing facility, office, and test site Owned/Leased El Paso, Texas Professional & Residential Manufacturing facility and distribution center Owned/Leased Laredo, Texas Professional & Residential Distribution center Leased Weatherford, Texas Professional Manufacturing facility Owned Baraboo, Wisconsin Professional & Residential Distribution center Leased Lake Mills, Wisconsin Professional Manufacturing facility Owned Plymouth, Wisconsin Professional & Residential Distribution center Owned Tomah, Wisconsin Professional Manufacturing facility and distribution center Owned/Leased International Countries: Beverley, Australia Professional Manufacturing facility and office Owned Braeside, Australia Professional & Residential Distribution center Leased Oevel, Belgium Professional & Residential Distribution center Owned/Leased Xiamen City, China Professional & Residential Manufacturing facility Leased Althengstett, Germany Professional Manufacturing facility and office Owned Fiano Romano, Italy Professional Manufacturing facility and office Owned/Leased Juarez, Mexico Professional & Residential Manufacturing facility Leased Monterrey, Mexico Professional & Residential Manufacturing facility Leased Ustron, Poland Professional Manufacturing facility Owned Ploiesti, Romania Professional Manufacturing facility and test site Owned Hertfordshire, United Kingdom Professional & Residential Manufacturing facility, office, and test site Owned

Item 4. Mine Safety Disclosures

Mine Safety Disclosures — required of mining issuers

14 edited+0 added−2 removed4 unchanged
Biggest changeKurt D. Svendsen 57, Vice President, Technology Vice President, Technology since March 2023. From November 2020 to February 2023, he served as Vice President, Strategy, Corporate and Channel Development. From June 2013 to October 2020, he served as Vice President, Information Technology. Joanna M.
Biggest changeFrom November 2020 to February 2023, he served as Vice President, Strategy, Corporate and Channel Development. From June 2013 to October 2020, he served as Vice President, Information Technology. Joanna M. Totsky 56, Vice President, General Counsel, and Corporate Secretary Vice President, General Counsel, and Corporate Secretary since June 2023.
From February 2011 through March 2019, she served as Chief Financial Officer for The Charles Machine Works, Inc., an underground construction company acquired by the company in April 2019. Edric C. Funk 51, Group Vice President, Golf, Grounds, and Irrigation Group Vice President, Golf, Grounds, and Irrigation since November 2022.
From February 2011 through March 2019, she served as Chief Financial Officer for The Charles Machine Works, Inc., an underground construction company acquired by the company in April 2019. Edric C. Funk 52, Group Vice President, Golf, Grounds, and Irrigation Group Vice President, Golf, Grounds, and Irrigation since November 2022.
He previously served as General Manager, Sitework Systems from November 2020 to November 2022, and prior to that led the company’s Center for Technology, Research and Innovation from July 2017 to October 2020. Gregory S. Janey 45, Group Vice President, Landscapes and Contractor Group Vice President, Landscapes and Contractor since November 2022.
He previously served as General Manager, Sitework Systems from November 2020 to November 2022, and prior to that led the company’s Center for Technology, Research and Innovation from July 2017 to October 2020. Gregory S. Janey 46, Group Vice President, Landscapes and Contractor Group Vice President, Landscapes and Contractor since November 2022.
Drake 51, Vice President and Chief Financial Officer Vice President and Chief Financial Officer since March 2023. She previously served as Vice President, Finance from July 2022 to February 2023. From April 2020 to June 2022, she served as Vice President, Construction and from April 2019 through March 2020, she served as Senior Managing Director, Integration.
Drake 52, Vice President and Chief Financial Officer Vice President and Chief Financial Officer since March 2023. She previously served as Vice President, Finance from July 2022 to February 2023. From April 2020 to June 2022, she served as Vice President, Construction and from April 2019 through March 2020, she served as Senior Managing Director, Integration.
From June 2014 through August 2015, he served as Group Vice President, International Business, Global Ag-Irrigation Business and Distributor Development. Jason P. Baab 48, Vice President, Strategy, Corporate Development, and Sustainability Vice President, Strategy, Corporate Development, and Sustainability since July 2023.
From June 2014 through August 2015, he served as Group Vice President, International Business, Global Ag-Irrigation Business and Distributor Development. Jason P. Baab 49, Vice President, Strategy, Corporate Development, and Sustainability Vice President, Strategy, Corporate Development, and Sustainability since July 2023.
ITEM 4. MINE SAFETY DISCLOSURES Not applicable. 30 Table of Contents INFORMATION ABOUT OUR EXECUTIVE OFFICERS The list below identifies those persons designated by our Board of Directors as executive officers of the company.
ITEM 4. MINE SAFETY DISCLOSURES Not applicable. 31 Table of Contents INFORMATION ABOUT OUR EXECUTIVE OFFICERS The list below identifies those persons designated by our Board of Directors as executive officers of the company.
He previously served as Vice President, Residential and Landscape Contractor Businesses from November 2019 to November 2022. From November 2017 to October 2019, he served as General Manager, Residential and Landscape Contractor Businesses. Margeaux M. King 46, Vice President, Human Resources Vice President, Human Resources since August 2022.
He previously served as Vice President, Residential and Landscape Contractor Businesses from November 2019 to November 2022. From November 2017 to October 2019, he served as General Manager, Residential and Landscape Contractor Businesses. Margeaux M. King 47, Vice President, Human Resources Vice President, Human Resources since August 2022.
Olson 59, Chairman of the Board, President and Chief Executive Officer Chairman of the Board since November 2017 and President and Chief Executive Officer since November 2016. From September 2015 through October 2016, he served as President and Chief Operating Officer.
Olson 60, Chairman of the Board, President and Chief Executive Officer Chairman of the Board since November 2017 and President and Chief Executive Officer since November 2016. From September 2015 through October 2016, he served as President and Chief Operating Officer.
The list sets forth each such person's age and position with the company as of December 13, 2023, as well as other positions held by the executive for at least the last five years. There are no family relationships between any director, executive officer, or person nominated to become a director or executive officer of the company.
The list sets forth each such person's age and position with the company as of December 11, 2024, as well as other positions held by the executive for at least the last five years. There are no family relationships between any director, executive officer, or person nominated to become a director or executive officer of the company.
Prior to joining the company, she held several roles at Cooper-Standard Holdings, a leading manufacturer of sealing, fuel and brake delivery, and fluid transfer systems, serving as Senior Vice President, Chief Legal and Transformation Officer and Secretary from November 2022 to May 2023, Senior Vice President, Chief Legal and Compliance Officer and Secretary from July 2019 to October 2022, and Vice President, Deputy General Counsel from October 2016 to June 2019. 31 Table of Contents PART II
Prior to joining the company, she held several roles at Cooper-Standard Holdings, a leading manufacturer of sealing, fuel and brake delivery, and fluid transfer systems, serving as Senior Vice President, Chief Legal and Transformation Officer and Secretary from November 2022 to May 2023, and Senior Vice President, Chief Legal and Compliance Officer and Secretary from July 2019 to October 2022. 32 Table of Contents PART II
Carpenter 49, Vice President, Global Operations and Integrated Supply Chain Vice President, Global Operations and Integrated Supply Chain since December 2021.
Carpenter 50, Vice President, Global Operations and Integrated Supply Chain Vice President, Global Operations and Integrated Supply Chain since December 2021.
Prior to joining the company, she held several roles at Ecolab, a global provider in water, hygiene and infection prevention solutions and services, serving as Senior Vice President, Human Resources, Global Total Rewards & Talent from February 2022 to July 2022, Senior Vice President, Human Resources, Global Total Rewards from September 2019 to January 2022, and Vice President, Human Resources, Global Compensation & Benefits from March 2016 to August 2019.
Prior to joining the company, she held several roles at Ecolab, a global provider in water, hygiene and infection prevention solutions and services, serving as Senior Vice President, Human Resources, Global Total Rewards & Talent from February 2022 to July 2022, and Senior Vice President, Human Resources, Global Total Rewards from September 2019 to January 2022. Peter D.
She previously served as Vice President, International, General Counsel and Corporate Secretary from March 2023 to June 2023. From August 2022 to February 2023 she served as Vice President, General Counsel and Corporate Secretary.
Amy E. Dahl 50, Vice President, International Vice President, International since June 2023. She previously served as Vice President, International, General Counsel and Corporate Secretary from March 2023 to June 2023. From August 2022 to February 2023 she served as Vice President, General Counsel and Corporate Secretary.
Peter D. Moeller 46, Group Vice President, Underground and Specialty Construction Group Vice President, Underground and Specialty Construction since March 2023. From November 2020 to February 2023, he served as Vice President, International. From November 2019 to October 2020, he served as Vice President, Sitework Systems. From November 2017 to October 2019, he served as General Manager, Sitework Systems.
Moeller 47, Group Vice President, Underground and Specialty Construction Group Vice President, Underground and Specialty Construction since March 2023. From November 2020 to February 2023, he served as Vice President, International. From November 2019 to October 2020, he served as Vice President, Sitework Systems. Kurt D. Svendsen 58, Vice President, Technology Vice President, Technology since March 2023.
Removed
Prior to joining Carrier, he held several roles at Rockwell Automation, Inc., an industrial automation and digital transformation company, serving as Vice President of Manufacturing Services from June 2018 to April 2019 and Director of Manufacturing Services from May 2016 to May 2018. Amy E. Dahl 49, Vice President, International Vice President, International since June 2023.
Removed
Totsky 55, Vice President, General Counsel, and Corporate Secretary Vice President, General Counsel, and Corporate Secretary since June 2023.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeIssuer Purchases of Equity Securities The following table sets forth information with respect to shares of our common stock purchased by the company during each of the three fiscal months in our fourth quarter ended October 31, 2023: Period Total Number of Shares (or Units) Purchased 1, 2, 3 Average Price Paid per Share (or Unit) Total Number of Shares (or Units) Purchased As Part of Publicly Announced Plans or Programs 1, 2 Maximum Number of Shares (or Units) that May Yet Be Purchased Under the Plans or Programs 1, 2 August 5, 2023 through September 1, 2023 — $ — — 6,949,491 September 2, 2023 through September 29, 2023 — — — 6,949,491 September 30, 2023 through October 31, 2023 1,560 86.01 — 6,949,491 Total 1,560 $ 86.01 — 1 On December 4, 2018, the company’s Board of Directors authorized the repurchase of 5,000,000 shares of the company’s common stock in open-market or in privately negotiated transactions.
Biggest changeThe following table sets forth information with respect to shares of our common stock purchased by the company during each of the three fiscal months in our fourth quarter ended October 31, 2024: Period Total Number of Shares (or Units) Purchased 1, 2, 3, 4 Average Price Paid per Share (or Unit) Total Number of Shares (or Units) Purchased As Part of Publicly Announced Plans or Programs 1, 2, 3 Maximum Number of Shares (or Units) that May Yet Be Purchased Under the Plans or Programs 1, 2, 3 August 3, 2024 through August 30, 2024 447,818 $ 89.32 447,818 9,323,599 August 31, 2024 through October 4, 2024 623,330 85.02 623,330 8,700,269 October 5, 2024 through October 31, 2024 529,771 83.29 528,312 8,171,957 Total 1,600,919 $ 85.65 1,599,460 1 On December 4, 2018, the company’s Board of Directors authorized the repurchase of up to 5,000,000 shares under the share repurchase program.
Restrictions on our ability to pay dividends are disclosed in Part II, Item 7, "Management's Discussion and Analysis of Financial Condition and Results of Operations." Preferred Stock As of October 31, 2023 and 2022, we had 1,000,000 voting shares and 850,000 non-voting shares of preferred stock, par value $1.00 per share, authorized, none of which were outstanding.
Restrictions on our ability to pay dividends are disclosed in Part II, Item 7, "Management's Discussion and Analysis of Financial Condition and Results of Operations." Preferred Stock As of October 31, 2024 and 2023, we had 1,000,000 voting shares and 850,000 non-voting shares of preferred stock, par value $1.00 per share, authorized, none of which were outstanding.
The total returns on TTC common stock depicted in the stock performance graph and table are not necessarily indicative of future performance. COMPARISON OF 5 YEAR CUMULATIVE TOTAL RETURN* Among The Toro Company, the S&P 500 Index, and the S&P 500 Industrial Machinery Index *$100 invested on 10/31/18 in stock or index, including reinvestment of dividends.
The total returns on TTC common stock depicted in the stock performance graph and table are not necessarily indicative of future performance. COMPARISON OF 5 YEAR CUMULATIVE TOTAL RETURN* Among The Toro Company, the S&P 500 Index, and the S&P 500 Industrial Machinery Index *$100 invested on 10/31/19 in stock or index, including reinvestment of dividends.
MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES Common Stock and Cash Dividends Our common stock is listed for trading on the New York Stock Exchange and trades under the symbol "TTC." As of October 31, 2023 and 2022, we had 175,000,000 shares of common stock, par value $1.00 per share, authorized, and 103,843,485 and 103,969,805 shares of common stock outstanding, respectively.
MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES Common Stock and Cash Dividends Our common stock is listed for trading on the New York Stock Exchange and trades under the symbol "TTC." As of October 31, 2024 and 2023, we had 175,000,000 shares of common stock, par value $1.00 per share, authorized, and 101,472,125 and 103,843,485 shares of common stock outstanding, respectively.
As announced on December 12, 2023, our Board of Directors increased our fiscal 2024 first quarter common stock cash dividend by 5.9 percent to $0.36 per share. Future common stock cash dividends will depend upon our financial condition, results of operations, capital requirements, and other factors deemed relevant by our Board of Directors.
As announced on December 10, 2024, our Board of Directors increased our fiscal 2025 first quarter common stock cash dividend by 5.6 percent to $0.38 per share. Future common stock cash dividends will depend upon our financial condition, results of operations, capital requirements, and other factors deemed relevant by our Board of Directors.
No shares were repurchased under this program during the time period indicated above. 3 Includes 1,560 shares of the company's common stock purchased in open-market transactions at an average price of $86.01 per share on behalf of a rabbi trust formed to pay benefit obligations of the company to participants in the company's deferred compensation plans.
No shares were repurchased under this tranche of the share repurchase program during the time period indicated above. 4 Includes 1,459 shares of the company's common stock purchased in open-market transactions at an average price of $82.66 per share on behalf of a rabbi trust formed to pay benefit obligations of the company to participants in the company's deferred compensation plans.
In each quarter of fiscal 2023, our Board of Directors declared a common stock cash dividend of $0.34 per share, which was a 13.3 percent increase over our common stock cash dividend of $0.30 per share paid in each quarter of fiscal 2022.
In each quarter of fiscal 2024, our Board of Directors declared a common stock cash dividend of $0.36 per share, which was a 5.9 percent increase over our common stock cash dividend of $0.34 per share paid in each quarter of fiscal 2023.
These 1,560 shares were not repurchased under the company's authorized stock repurchase programs described in notes 1 and 2 above. 32 Table of Contents The Toro Company Common Stock Comparative Performance Graph The following stock performance graph and table depict the cumulative total shareholder return (assuming reinvestment of dividends) on $100 invested in each of TTC common stock, the S&P 500 Index, and the S&P 500 Industrial Machinery Index for the five-year period from October 31, 2018 through October 31, 2023.
These 1,459 shares were not repurchased under the share repurchase program. 33 Table of Contents The Toro Company Common Stock Comparative Performance Graph The following stock performance graph and table depict the cumulative total shareholder return (assuming reinvestment of dividends) on $100 invested in each of TTC common stock, the S&P 500 Index, and the S&P 500 Industrial Machinery Index for the five-year period from October 31, 2019 through October 31, 2024.
Fiscal Years Ended October 31 2018 2019 2020 2021 2022 2023 The Toro Company $ 100.00 $ 138.80 $ 149.82 $ 176.04 $ 197.09 $ 153.25 S&P 500 100.00 114.33 125.43 179.25 153.06 168.59 S&P 500 Industrial Machinery Index $ 100.00 $ 121.96 $ 133.77 $ 176.57 $ 153.30 $ 167.86 The information contained in The Toro Company Common Stock Comparative Performance Graph section shall not be deemed to be "soliciting material" or "filed" or incorporated by reference in future filings with the SEC, or subject to the liabilities of Section 18 of the Exchange Act, except to the extent that we specifically request that it be treated as soliciting material or incorporate it by reference into a document filed under the Securities Act or the Exchange Act.
Fiscal Years Ended October 31 2019 2020 2021 2022 2023 2024 The Toro Company $ 100.00 $ 107.94 $ 126.82 $ 141.99 $ 110.40 $ 111.61 S&P 500 100.00 109.71 156.79 133.88 147.46 203.52 S&P 500 Industrial Machinery Index $ 100.00 $ 109.69 $ 144.78 $ 125.70 $ 137.64 $ 187.53 The information contained in The Toro Company Common Stock Comparative Performance Graph section shall not be deemed to be "soliciting material" or "filed" or incorporated by reference in future filings with the SEC, or subject to the liabilities of Section 18 of the Exchange Act, except to the extent that we specifically request that it be treated as soliciting material or incorporate it by reference into a document filed under the Securities Act or the Exchange Act.
As a result, 1,949,491 shares remained available to repurchase under this program as of October 31, 2023. 2 On December 13, 2022, the company’s Board of Directors authorized the repurchase of an additional 5,000,000 shares of the company’s common stock in open-market or privately negotiated transactions.
The company repurchased 771,417 shares under this tranche of the share repurchase program during the period indicated above and as a result, no shares remained available to repurchase as of October 31, 2024. 2 On December 13, 2022, the company’s Board of Directors authorized the repurchase of up to an additional 5,000,000 shares under the share repurchase program.
This authorized stock repurchase program has no expiration date but may be terminated by the company’s Board of Directors at any time.
The share repurchase program has no expiration date but may be terminated by the company's Board of Directors at any time. Shares of the company's common stock surrendered by employees to satisfy minimum tax withholding obligations upon vesting of certain stock-based compensation awards are not a part of the share repurchase program.
Removed
Shareholders As of December 13, 2023, we had 2,450 shareholders of record.
Added
Shareholders As of December 11, 2024, we had 2,372 shareholders of record. Issuer Purchases of Equity Securities Periodically, the company's Board of Directors authorizes the repurchase of shares of the company's common stock in open-market or privately negotiated transactions under the company's Board authorized share repurchase program ("share repurchase program").
Removed
This authorized stock repurchase program has no expiration date but may be terminated by the company's Board of Directors at any time. No shares were repurchased under this program during the time period indicated above.
Added
The company repurchased 828,043 shares under this tranche of the share repurchase program during the period indicated above and as a result, 4,171,957 shares remained available to repurchase as of October 31, 2024. 3 On December 10, 2024, the company’s Board of Directors authorized the repurchase of up to an additional 4,000,000 shares under the share repurchase program.

Item 6. [Reserved]

Selected Financial Data — reserved (removed by SEC in 2021)

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Biggest changeITEM 6. [Reserved] 33 ITEM 7. Management's Discussion and Analysis of Financial Condition and Results of Operations 34 Company Overview 34 Results of Operations 36 Business Segments 37 Financial Position 38 Non-GAAP Financial Measures 42 Critical Accounting Policies and Estimates 45 ITEM 7A. Quantitative and Qualitative Disclosures About Market Risk 51 ITEM 8.
Biggest changeITEM 6. [Reserved] 34 ITEM 7. Management's Discussion and Analysis of Financial Condition and Results of Operations 35 Company Overview 35 Results of Operations 36 Business Segments 37 Financial Position 39 Non-GAAP Financial Measures 43 Critical Accounting Policies and Estimates 46 ITEM 7A. Quantitative and Qualitative Disclosures About Market Risk 52 ITEM 8.
Financial Statements and Supplementary Data 53 Management's Report on Internal Control over Financial Reporting 53 Report of Independent Registered Public Accounting Firm 54 Consolidated Statements of Earnings 57 Consolidated Statements of Comprehensive Income 57 Consolidated Balance Sheets 58 Consolidated Statements of Cash Flows 59 Consolidated Statements of Stockholders' Equity 60 Notes to Consolidated Financial Statements 61
Financial Statements and Supplementary Data 54 Management's Report on Internal Control over Financial Reporting 54 Report of Independent Registered Public Accounting Firm 55 Consolidated Statements of Earnings 57 Consolidated Statements of Comprehensive Income 57 Consolidated Balance Sheets 58 Consolidated Statements of Cash Flows 59 Consolidated Statements of Stockholders' Equity 60 Notes to Consolidated Financial Statements 61

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

109 edited+14 added−30 removed84 unchanged
Biggest changeIndebtedness The following is a summary of our indebtedness (dollars in millions): October 31 2023 2022 Revolving credit facility, due October 2026 $ 40.0 $ — $270 million term loan, due October 2026 270.0 270.0 $200 million term loan, due April 2027 200.0 200.0 3.81% series A senior notes, due June 2029 100.0 100.0 3.91% series B senior notes, due June 2031 100.0 100.0 3.97% senior notes, due June 2032 100.0 100.0 7.8% debentures, due June 2027 100.0 100.0 6.625% senior notes, due May 2037 124.2 124.1 Less: unamortized debt issuance costs 2.7 3.3 Long-term debt $ 1,031.5 $ 990.8 Principal payments required on our outstanding indebtedness, based on the maturity dates defined within our debt arrangements, for each of the succeeding fiscal years is as follows (dollars in millions): Succeeding fiscal year Principal payments 2024 $ — 2025 37.0 2026 303.0 2027 270.0 2028 — Thereafter 425.0 Total principal payments $ 1,035.0 Interest payments required on our outstanding indebtedness, assuming no prepayments of indebtedness, for each of the succeeding fiscal years is as follows (dollars in millions): Succeeding fiscal year Interest payments 2024 $ 57.3 2025 56.6 2026 53.7 2027 30.1 2028 20.0 Thereafter 97.6 Interest on variable rate debt was calculated using the interest rate as of October 31, 2023.
Biggest changeWe believe our current liquidity position, including the funds available through existing, and potential future, financing arrangements and projected cash flows from operations will be sufficient to provide the necessary capital resources for our anticipated working capital needs, payroll, and other administrative costs, capital expenditures, lease payments, purchase commitments, contractual obligations, acquisitions, investments, establishment of new facilities, expansion and renovation of existing facilities, financing receivables from customers that are not financed with Red Iron or other third-party financial institutions, contingent consideration payments, debt repayments, interest payments, quarterly cash dividend payments, and common stock repurchases, all as applicable, for at least the next twelve months. 40 Table of Contents Indebtedness The following is a summary of our indebtedness (dollars in millions): October 31 2024 2023 Revolving credit facility, due October 2029 $ — $ 40.0 Term loan, due October 2029 200.0 270.0 Term loan, due April 2027 200.0 200.0 3.81% series A senior notes, due June 2029 100.0 100.0 3.91% series B senior notes, due June 2031 100.0 100.0 3.97% senior notes, due June 2032 100.0 100.0 7.8% debentures, due June 2027 100.0 100.0 6.625% senior notes, due May 2037 124.2 124.2 Less: unamortized debt issuance costs 2.4 2.7 Long-term debt $ 921.8 $ 1,031.5 Less: current portion of long-term debt 10.0 — Long-term debt, less current portion $ 911.8 $ 1,031.5 Principal payments required on our outstanding indebtedness, based on the maturity dates defined within our debt arrangements, for each of the succeeding fiscal years is as follows (dollars in millions): Succeeding fiscal year Principal payments 2025 $ 10.0 2026 20.0 2027 270.0 2028 20.0 2029 280.0 Thereafter 325.0 Total principal payments $ 925.0 Interest payments required on our outstanding indebtedness, assuming no prepayments of indebtedness, for each of the succeeding fiscal years is as follows (dollars in millions): Succeeding fiscal year Interest payments 2025 $ 50.6 2026 49.6 2027 43.3 2028 31.0 2029 29.1 Thereafter 95.2 Interest on variable rate debt was calculated using the interest rate as of October 31, 2024.
Our MD&A is presented as follows: • Company Overview • Results of Operations • Business Segments • Financial Position • Non-GAAP Financial Measures • Critical Accounting Policies and Estimates Non-GAAP Financial Measures Throughout this MD&A, we have provided financial and liquidity measures that are not calculated or presented in accordance with U.S.
Our MD&A is presented as follows: • Company Overview • Results of Operations • Business Segments • Financial Position • Non-GAAP Financial Measures • Critical Accounting Policies and Estimates Throughout this MD&A, we have provided financial and liquidity measures that are not calculated or presented in accordance with U.S.
As of October 31, 2023, our debt ratings for long-term unsecured senior, non-credit enhanced debt by Standard and Poor's Ratings Group and by Moody's Investors Service were BBB and Baa1, respectively, and in both cases with a stable outlook. The agreements governing our outstanding indebtedness are described in Note 6, Indebtedness , of the Notes to Consolidated Financial Statements.
As of October 31, 2024, our debt ratings for long-term unsecured senior, non-credit enhanced debt by Standard and Poor's Ratings Group and by Moody's Investors Service were BBB and Baa1, respectively, and in both cases with a stable outlook. The agreements governing our outstanding indebtedness are described in Note 6, Indebtedness , of the Notes to Consolidated Financial Statements.
Generally, the cost of a program is recorded as a reduction from gross sales when revenue is recognized and thus is considered to be variable consideration if the expense is determined to represent a price concession because the program either: (i) results in an immediate reduction of the transaction price with no anticipated future costs or consideration to be provided to the customer or (ii) we anticipate a future cost based on historical or expected future business practice for which we do not receive a distinct good or service in exchange for the future consideration provided to the customer under the program.
Generally, the cost of a 46 Table of Contents program is recorded as a reduction from gross sales when revenue is recognized and thus is considered to be variable consideration if the expense is determined to represent a price concession because the program either: (i) results in an immediate reduction of the transaction price with no anticipated future costs or consideration to be provided to the customer or (ii) we anticipate a future cost based on historical or expected future business practice for which we do not receive a distinct good or service in exchange for the future consideration provided to the customer under the program.
Employee stock-based compensation activity, including the exercise of stock options, can be unpredictable and can significantly impact our net earnings, net earnings per diluted share, and effective tax rate. These amounts represent the discrete tax benefits recorded as excess tax deductions for stock-based compensation during the fiscal years ended October 31, 2023 and 2022.
Employee stock-based compensation activity, including the exercise of stock options, can be unpredictable and can significantly impact our net earnings, net earnings per diluted share, and effective tax rate. These amounts represent the discrete tax benefits recorded as excess tax deductions for stock-based compensation during the fiscal years ended October 31, 2024 and 2023.
Discussion of fiscal 2021 items and the year-over-year comparison of changes in our financial condition and results of operations as of and for the fiscal years ended October 31, 2022 and 2021 can be found in Part II, Item 7, "Management’s Discussion and Analysis of Financial Condition and Results of Operations," of our Annual Report on Form 10-K for the fiscal year ended October 31, 2022.
Discussion of fiscal 2022 items and the year-over-year comparison of changes in our financial condition and results of operations as of and for the fiscal years ended October 31, 2023 and 2022 can be found in Part II, Item 7, "Management’s Discussion and Analysis of Financial Condition and Results of Operations," of our Annual Report on Form 10-K for the fiscal year ended October 31, 2023.
As of October 31, 2023, the unrecognized deferred tax liabilities for temporary differences related to our investment in non-U.S. subsidiaries, and any withholding, state, or additional federal taxes upon any future repatriation, are not material and have not been recorded.
As of October 31, 2024, the unrecognized deferred tax liabilities for temporary differences related to our investment in non-U.S. subsidiaries, and any withholding, state, or additional federal taxes upon any future repatriation, are not material and have not been recorded.
At our election, and with the approval of the named borrowers on the revolving credit facility and the election of the lenders to fund such increase, the aggregate maximum principal amount available under the revolving credit facility may be increased by an amount of up to $300.0 million.
At our election, and with the approval of the named borrowers on the revolving credit facility and the election of the lenders to fund such increase, the aggregate maximum principal amount available under the revolving credit facility may be increased by an amount of up to $450.0 million.
Unless expressly stated otherwise, the comparisons presented in this MD&A refer to the year-over-year comparison of changes in our financial condition and results of operations as of and for the fiscal years ended October 31, 2023 and 2022.
Unless expressly stated otherwise, the comparisons presented in this MD&A refer to the year-over-year comparison of changes in our financial condition and results of operations as of and for the fiscal years ended October 31, 2024 and 2023.
It is possible that an unfavorable adjustment to our inventory valuation reserve for excess, slow moving, and obsolete inventory may be required in the future if there is a change in any of the aforementioned factors that adversely 49 Table of Contents impacts our estimates of future demand for our products and we do not modify our purchases or production schedule accordingly.
It is possible that an unfavorable adjustment to our inventory valuation reserve for excess, slow moving, and obsolete inventory may be required in the future if there is a change in any of the aforementioned factors that adversely impacts our estimates of future demand for our products and we do not modify our purchases or production schedule accordingly.
Financing terms to the distributors and dealers require payment as the inventory, which secures the indebtedness, is sold to end-users or when payment otherwise become due under the agreements between the financial institutions and the distributors and dealers, whichever occurs first.
Financing terms to the distributors and dealers require payment as the inventory, which secures the indebtedness, is sold to end-users or when payment otherwise becomes due under the agreements between the financial institutions and the distributors and dealers, whichever occurs first.
We currently expect to continue share repurchases in fiscal 2024, depending on our cash balance, debt repayments, common stock price and other market conditions, our anticipated working capital needs, and/or other factors.
We currently expect to continue share repurchases in fiscal 2025, depending on our cash balance, debt repayments, common stock price and other market conditions, our anticipated working capital needs, and/or other factors.
The non-GAAP financial measures may differ from similar measures used by other companies. Reconciliation of Non-GAAP Financial Measures The following table provides a reconciliation of financial performance measures calculated and reported in accordance with U.S.
The non-GAAP financial measures may differ from similar measures used by other companies. 43 Table of Contents Reconciliation of Non-GAAP Financial Measures The following table provides a reconciliation of financial performance measures calculated and reported in accordance with U.S.
As of October 31, 2023, our indefinite-lived intangible asset balances, which consist of certain trade names, were $271.5 million. Indefinite-lived intangible assets are not amortized, but are assessed for impairment at least annually during the fourth quarter of each fiscal year unless events or changes in circumstances indicate that impairment may have occurred prior to the annual assessment.
As of October 31, 2024, our indefinite-lived intangible asset balances, which consist of certain trade names, were $271.6 million. Indefinite-lived intangible assets are not amortized, but are assessed for impairment at least annually during the fourth quarter of each fiscal year unless events or changes in circumstances indicate that impairment may have occurred prior to the annual assessment.
We select guideline public companies that are engaged in the same or similar lines of business and that have reasonably similar qualitative factors as our reporting units, while also considering relevant quantitative factors such as profitability and market 47 Table of Contents capitalization, where applicable.
We select guideline public companies that are engaged in the same or similar lines of business and that have reasonably similar qualitative factors as our reporting units, while also considering relevant quantitative factors such as profitability and market capitalization, where applicable.
Share Repurchases Our Board authorized stock repurchase program provides shares for use in connection with our stock-based compensation plans, among other uses, and has no expiration.
Share Repurchases Our share repurchase program provides shares for use in connection with our stock-based compensation plans, among other uses, and has no expiration.
Goodwill is not amortized, but is assessed for impairment at least annually during the fourth quarter of each fiscal year unless events or changes in circumstances indicate that impairment may have occurred prior to the annual assessment.
Goodwill is not amortized, but is assessed for impairment at the reporting unit level at least annually during the fourth quarter of each fiscal year unless events or changes in circumstances indicate that impairment may have occurred prior to the annual assessment.
We believe that our accrual for sales promotion and incentive programs is adequate as of October 31, 2023 and historically has been adequate; however, due to the inherent uncertainty in the accrual estimation process, 46 Table of Contents actual results may differ from these estimates if competitive factors dictate the need to enhance or modify sales promotion and incentive programs or if customer usage, product mix, or field inventory levels vary from historical trends.
We believe that our accrual for sales promotion and incentive programs is adequate as of October 31, 2024 and historically has been adequate; however, due to the inherent uncertainty in the accrual estimation process, actual results may differ from these estimates if competitive factors dictate the need to enhance or modify sales promotion and incentive programs or if customer usage, product mix, or field inventory levels vary from historical trends.
As of October 31, 2023 we had $40.0 million outstanding under the revolving credit facility 40 Table of Contents and $2.6 million outstanding under the sublimit for standby letters of credit, resulting in $557.4 million of unutilized availability under our revolving credit facility.
As of October 31, 2023 we had $40.0 million outstanding borrowings under the revolving credit facility and $2.6 million outstanding under the sublimit for standby letters of credit, resulting in $557.4 million of unutilized availability under our revolving credit facility.
The following table summarizes our results of operations as a percentage of our consolidated net sales: Fiscal Years Ended October 31 2023 2022 Net sales 100.0 % 100.0 % Cost of sales (65.4) (66.7) Gross margin 34.6 33.3 SG&A expense (21.8) (20.5) Non-cash impairment charges (3.3) — Operating earnings 9.5 12.8 Interest expense (1.3) (0.8) Other income, net 0.6 0.2 Earnings before income taxes 8.8 12.2 Provision for income taxes (1.6) (2.4) Net earnings 7.2 % 9.8 % Gross Profit and Gross Margin Gross profit represents net sales less cost of sales and gross margin represents gross profit as a percentage of net sales.
The following table summarizes our results of operations as a percentage of our consolidated net sales: Fiscal Years Ended October 31 2024 2023 Net sales 100.0 % 100.0 % Cost of sales (66.2) (65.4) Gross margin 33.8 34.6 SG&A expense (22.2) (21.8) Non-cash impairment charges — (3.3) Operating earnings 11.6 9.5 Interest expense (1.3) (1.3) Other income, net 0.9 0.6 Earnings before income taxes 11.2 8.8 Provision for income taxes (2.1) (1.6) Net earnings 9.1 % 7.2 % Gross Profit and Gross Margin Gross profit represents net sales less cost of sales and gross margin represents gross profit as a percentage of net sales.
Projected sales demand and production requirements can also be affected by the significant redesign of our existing products or the replacement of an existing product by an entirely new generation of product.
Projected sales demand and production requirements can also be affected by the significant redesign of our existing products or the replacement of an existing product by an entirely new 50 Table of Contents generation of product.
Rates are generally indexed to the Secured Overnight 41 Table of Contents Financing Rate ("SOFR"), or an alternative variable rate, plus a fixed percentage that differs based on whether the financing is for a distributor or dealer. Rates may also vary based on the product that is financed.
Rates are generally indexed to the Secured Overnight Financing Rate ("SOFR"), or an alternative variable rate, plus a fixed percentage that differs based on whether the financing is for a distributor or dealer. Rates may also vary based on the product that is financed.
During the preparation of the financial statements for the third quarter of fiscal 2023, we concluded that impairment indicators existed for our Intimidator reporting unit goodwill. Based on the resulting impairment assessment performed, we recorded an impairment charge of $133.3 million related to goodwill of the Intimidator reporting unit in the third quarter of fiscal 2023.
Fiscal 2023 Impairment During the preparation of the financial statements for the third quarter of fiscal 2023, we concluded that impairment indicators existed for our Intimidator goodwill. Based on the resulting impairment assessment performed, we recorded an impairment charge of $133.3 million in the third quarter of fiscal 2023.
Impairment Goodwill Goodwill is initially recognized as a result of the excess of purchase consideration transferred over the estimated fair value of the net assets acquired in a business combination. As of October 31, 2023, our goodwill balance was $450.8 million.
Impairment Goodwill Goodwill is initially recognized as a result of the excess of purchase consideration transferred over the estimated fair value of the net assets acquired in a business combination. As of October 31, 2024, our goodwill balance was $450.3 million.
We believe that our $143.9 million warranty accrual as of October 31, 2023 is adequate and historically has been adequate; however, due to the inherent uncertainty in the accrual estimation process, including projecting future warranty claims, costs associated with servicing future warranty claims, and unexpected major rework campaigns that may arise in the future, our actual warranty costs incurred may differ from our warranty accrual estimate.
We believe that our $150.2 million warranty accrual as of October 31, 2024 is adequate and historically has been adequate; however, due to the inherent uncertainty in the accrual estimation process, including projecting future warranty claims, costs associated with servicing future warranty claims, and unexpected major rework campaigns that may arise in the future, our actual warranty costs incurred may differ from our warranty accrual estimate.
We have also entered into inventory repurchase agreements with the other third-party financial institutions under which we have agreed to repurchase certain repossessed products. As of October 31, 2023 and 2022, we were contingently liable to repurchase up to a maximum amount of $32.2 million and $80.0 million of repossessed inventory, respectively.
We have also entered into inventory repurchase agreements with the other third-party financial institutions under which we have agreed to repurchase certain repossessed products. As of October 31, 2024 and 2023, we were contingently liable to repurchase up to a maximum amount of $29.5 million and $32.2 million of repossessed inventory, respectively.
Based on the fourth quarter annual quantitative goodwill impairment analysis, we determined there was no impairment of goodwill for any of our reporting units as the fair value of each reporting unit exceeded its respective carrying value, including goodwill.
Based on the fourth quarter annual quantitative goodwill impairment analysis, we determined there was no impairment of goodwill for any of our reporting units as the fair value of each reporting unit exceeded its respective carrying value, including goodwill. Further, the fair value of each reporting unit exceeded its respective carrying value, including goodwill, in excess of 15 percent.
As such estimates are sensitive to changes in the underlying inputs and assumptions, we performed sensitivity analyses to address this risk. Excluding the Intimidator Spartan trade name, the discount rate could be increased by 170 basis points with no impairment indicated for any of our indefinite-lived intangible assets.
As such estimates are sensitive to changes in the underlying inputs and assumptions, we performed sensitivity analyses to address this risk. The discount rate could be increased by 270 basis points with no impairment indicated for any of our indefinite-lived intangible assets.
Acquisition-related costs for the fiscal year ended October 31, 2023 represent integration costs incurred in connection with the acquisition. Acquisition-related costs for the fiscal year ended October 31, 2022 represent transaction and integration costs incurred in connection with the acquisition.
Acquisition-related costs for the fiscal year ended October 31, 2023 represent integration costs incurred in connection with the acquisition.
Although we believe our inventory valuation reserve for excess, slow-moving, and obsolete inventory is adequate at $43.9 million as of October 31, 2023, projecting sales demand and production requirements involves significant management judgment regarding future events.
Although we believe our inventory valuation reserve for excess, slow-moving, and obsolete inventory is adequate at $47.8 million as of October 31, 2024, projecting sales demand and production requirements involves significant management judgment regarding future events.
On December 12, 2023, our Board of Directors increased our fiscal 2024 first quarter common stock cash dividend by 5.9 percent to $0.36 per share. Future common stock cash dividends will depend upon our financial condition, results of operations, capital requirements, and other factors deemed relevant by our Board of Directors.
On December 10, 2024, our Board of Directors increased our fiscal 2025 first quarter common stock cash dividend by 5.6 percent to $0.38 per share. Future common stock cash dividends will depend upon our financial condition, results of operations, capital requirements, and other factors deemed relevant by our Board of Directors.
Based on our fourth quarter quantitative impairment analysis, we determined that our indefinite-lived intangible assets were not impaired as the estimated fair value of each of our indefinite-lived intangible assets exceeded its carrying value. Further, excluding the Intimidator Spartan trade name, the fair value of each of our indefinite-lived intangible assets exceeded its carrying value in excess of 20 percent.
Based on our fourth quarter quantitative impairment analysis, we determined that our indefinite-lived intangible assets were not impaired as the estimated fair value of each of our indefinite-lived intangible assets exceeded its carrying value. Further, the fair value of each of our indefinite-lived intangible assets exceeded its carrying value in excess of 32 percent.
Our continued goal is to maintain requisite inventory levels to meet our anticipated production requirements, avoid manufacturing delays, and meet the demand for our products, as well as ensure service parts availability for our customers.
FINANCIAL POSITION Working Capital Our ongoing goal is to maintain requisite inventory levels to meet our anticipated production requirements, avoid manufacturing delays, and meet the demand for our products, as well as working to ensure service parts availability for our customers.
During the fourth quarter of fiscal 2023, consistent with prior fiscal years, we performed our annual quantitative impairment assessment for indefinite-lived intangible assets by comparing the carrying amounts of each respective asset, or asset group, to its estimated fair value.
We assess indefinite-lived intangible assets for impairment at the individual indefinite-lived intangible asset or asset group level, as appropriate. During the fourth quarter of fiscal 2024, consistent with prior fiscal years, we performed our annual quantitative impairment assessment for indefinite-lived intangible assets by comparing the carrying amounts of each respective asset, or asset group, to its estimated fair value.
GAAP for the fiscal years ended October 31, 2023 and October 31, 2022 (dollars in millions, except percentage data): Fiscal Years Ended October 31, 2023 October 31, 2022 Net cash provided by operating activities $ 306.8 $ 297.2 Less: Purchases of property, plant and equipment, net of proceeds from insurance claim 142.4 143.5 Free cash flow 164.4 153.7 Net earnings $ 329.7 $ 443.3 Free cash flow conversion percentage 49.9 % 34.7 % CRITICAL ACCOUNTING POLICIES AND ESTIMATES In preparing our Consolidated Financial Statements in conformity with U.S.
GAAP for the fiscal years ended October 31, 2024 and October 31, 2023 (dollars in millions, except percentage data): Fiscal Years Ended October 31, 2024 October 31, 2023 Net cash provided by operating activities $ 569.9 $ 306.8 Less: Purchases of property, plant and equipment, net of proceeds from insurance claim 99.2 142.4 Free cash flow 470.7 164.4 Net earnings $ 418.9 $ 329.7 Free cash flow conversion percentage 112.4 % 49.9 % CRITICAL ACCOUNTING POLICIES AND ESTIMATES In preparing our Consolidated Financial Statements in conformity with U.S.
The net amount of receivables financed for dealers and distributors under the arrangement with Red Iron during fiscal 2023 and 2022 was $2,789.5 million and $2,627.5 million, respectively. The total amount of net receivables outstanding under the arrangement with Red Iron as of October 31, 2023 and 2022 was $1,019.0 million and $776.1 million, respectively.
The net amount of receivables financed for dealers and distributors under the arrangement with Red Iron during fiscal 2024 and 2023 was $2,613.3 million and $2,789.5 million, respectively. The total amount of net receivables outstanding under the arrangement with Red Iron as of October 31, 2024 and 2023 was $979.6 million and $1,019.0 million, respectively.
Our maximum exposure for credit collection under those arrangements as of October 31, 2023 and 2022 was $5.2 million and $8.6 million, respectively.
Our maximum exposure for credit collection under those arrangements as of October 31, 2024 and 2023 was $2.9 million and $5.2 million, respectively.
In other circumstances, the anticipated future cost of a program based on historical or expected future business practice is recorded as SG&A expense because we receive a distinct good or service in exchange for the future consideration provided to the customer under the program. 45 Table of Contents Examples of significant sales promotions and incentive programs that are considered to be variable consideration because the cost of the program is classified as a reduction from gross sales are as follows: • Off-Invoice Discounts: Our off-invoice discounts represent an immediate reduction in the selling price of our products that is realized at the time of sale with no anticipated future cost or consideration provided to the customer. • Rebate Programs: Our rebate programs are generally based on claims submitted from either our direct customers or end-users of our products or are based on our purchase or retail sales goals for our direct customers of certain quantities or mixes of product during a specified time period, depending upon the program.
Examples of significant sales promotions and incentive programs that are considered to be variable consideration because the cost of the program is classified as a reduction from gross sales are as follows: • Off-Invoice Discounts: Our off-invoice discounts represent an immediate reduction in the selling price of our products that is realized at the time of sale with no anticipated future cost or consideration provided to the customer. • Rebate Programs: Our rebate programs are generally based on claims submitted from either our direct customers or end-users of our products or are based on our purchase or retail sales goals for our direct customers of certain quantities or mixes of product during a specified time period, depending upon the program.
Consideration is typically provided to our customers for our rebate programs after the initial sale of our products to our direct customers and thus, there is generally an anticipated future cost at the time revenue is recognized based on historical and expected future business practice. • Financing Programs: Our financing programs consist of wholesale floor plan financing with Red Iron and separate third-party financial institutions and end-user retail financing.
Consideration is typically provided to our customers for our rebate programs after the initial sale of our products to our direct customers and thus, there is generally an anticipated future cost at the time revenue is recognized based on historical and expected future business practice. • Financing Programs: Our financing programs consist of inventory financing arrangements with financial institutions and end-user financing.
Refer to Note 1, Summary of Significant Accounting Policies and Related Data , of the Notes to Consolidated Financial Statements within the section entitled "Cost of Sales," for a description of expenses included in cost of sales. Gross profit for fiscal 2023 was $1,577.6 million, up 4.9 percent compared to gross profit of $1,504.6 million in fiscal 2022.
Refer to Note 1, Summary of Significant Accounting Policies and Related Data , of the Notes to Consolidated Financial Statements within the section entitled "Cost of Sales," for a description of expenses included in cost of sales. Gross profit for fiscal 2024 was $1,549.3 million, down 1.8 percent compared to gross profit of $1,577.6 million in fiscal 2023.
We continued our history of paying quarterly cash dividends throughout fiscal 2023 and increased our fiscal 2023 quarterly cash dividend by 13.3 percent to $0.34 per share compared to $0.30 per share paid in fiscal 2022. We also repurchased shares of our common stock under our Board authorized repurchase program, thereby reducing our total shares outstanding.
We continued our history of paying quarterly cash dividends throughout fiscal 2024 and increased our fiscal 2024 quarterly cash dividend by 5.9 percent to $0.36 per share compared to $0.34 per share paid in fiscal 2023. We also repurchased shares of our common stock under our share repurchase program, thereby reducing our total shares outstanding.
As of October 31, 2023 and 2022, $234.7 million and $220.0 million, respectively, of receivables financed by HCFC and the other third-party financial institutions were outstanding.
As of October 31, 2024 and 2023, $272.2 million and $234.7 million, respectively, of receivables financed by HCFC and the other third-party financial institutions were outstanding.
Our revolving credit facility has a borrowing capacity of up to $600.0 million that matures on October 5, 2026. Included in the revolving credit facility is a $10.0 million sublimit for standby letters of credit and a $30.0 million sublimit for swingline loans.
Our revolving credit facility has a borrowing capacity of up to $900.0 million that matures on October 2, 2029. Included in the revolving credit facility is a $10.0 million sublimit for standby letters of credit and a $75.0 million sublimit for swingline loans.
The following table highlights several key measures of our working capital performance (dollars in millions): 38 Table of Contents Fiscal Years Ended October 31 2023 2022 Average receivables, net $ 379.2 $ 351.7 Average inventories, net $ 1,134.5 $ 914.4 Average accounts payable $ 450.9 $ 494.6 Average days outstanding for receivables 30.4 28.4 Average inventory turnover (times per fiscal year) 2.6 3.3 As of the end of fiscal 2023, our average net working capital was 23.3 percent compared to 17.1 percent as of the end of fiscal 2022.
The following table highlights several key measures of our working capital performance (dollars in millions): Fiscal Years Ended October 31 2024 2023 Average receivables, net $ 480.0 $ 379.2 Average inventories, net $ 1,156.8 $ 1,134.5 Average accounts payable $ 449.0 $ 450.9 Average days outstanding for receivables 38.2 30.4 Average inventory turnover (times per fiscal year) 2.6 2.6 As of the end of fiscal 2024, our average net working capital was 25.9 percent compared to 23.3 percent as of the end of fiscal 2023.
As of October 31, 2023, we had recorded an accrual for sales promotion and incentive programs of $163.0 million within the Consolidated Balance Sheets.
As of October 31, 2024, we had recorded an accrual for sales promotion and incentive programs of $180.4 million within the Consolidated Balance Sheets.
The following table presents net sales and operating loss for our Other activities (dollars in millions): Fiscal Years Ended October 31 2023 2022 Net sales $ 24.4 $ 16.5 Percentage change from prior year 47.9 % (17.2) % Operating loss $ (177.5) $ (144.2) Other Net Sales Net sales for our Other activities includes sales from our wholly-owned domestic distribution company net of intersegment sales from the Professional and Residential segments to the distribution company.
Net sales for our Other activities represented 0.6 percent and 0.5 percent of consolidated net sales for fiscal 2024 and 2023, respectively. 38 Table of Contents The following table presents net sales and operating loss for our Other activities (dollars in millions): Fiscal Years Ended October 31 2024 2023 Net sales $ 28.6 $ 24.4 Percentage change from prior year 17.2 % 47.9 % Operating loss $ (204.5) $ (177.5) Other Net Sales Net sales for our Other activities includes sales from our wholly-owned domestic distribution company net of intersegment sales from the Professional and Residential segments to the distribution company.
GAAP to the most directly comparable non-GAAP financial performance measures for the fiscal years ended October 31, 2023 and 2022 (dollars in millions, except per share and percentage data): 43 Table of Contents Fiscal Years Ended October 31, 2023 October 31, 2022 Gross profit $ 1,577.6 $ 1,504.6 Acquisition-related costs 1 0.2 1.6 Restructuring charges 2 1.2 — Adjusted gross profit $ 1,579.0 $ 1,506.2 Gross margin 34.6 % 33.3 % Acquisition-related costs 1 — % 0.1 % Restructuring charges 2 0.1 % — % Adjusted gross margin 34.7 % 33.4 % Operating earnings $ 430.7 $ 575.7 Acquisition-related costs 1 0.4 4.0 Restructuring charges 2 5.0 — Non-cash impairment charges 3 151.3 — Adjusted operating earnings $ 587.4 $ 579.7 Operating earnings margin 9.5 % 12.8 % Restructuring charges 2 0.1 % — % Non-cash impairment charges 3 3.3 % — % Adjusted operating earnings margin 12.9 % 12.8 % Earnings before income taxes $ 400.5 $ 552.5 Acquisition-related costs 1 0.4 4.0 Restructuring charges 2 5.0 — Non-cash impairment charges 3 151.3 — Adjusted earnings before income taxes $ 557.2 $ 556.5 Income tax provision $ 70.8 $ 109.2 Acquisition-related costs 1 — 0.8 Restructuring charges 2 1.1 — Non-cash impairment charges 3 36.7 — Tax impact of stock-based compensation 4 5.1 2.3 Adjusted income tax provision $ 113.7 $ 112.3 Net earnings $ 329.7 $ 443.3 Acquisition-related costs 1 0.4 3.2 Restructuring charges 2 3.9 — Non-cash impairment charges 3 114.6 — Tax impact of stock-based compensation 4 (5.1) (2.3) Adjusted net earnings $ 443.5 $ 444.2 Net earnings per diluted share $ 3.13 $ 4.20 Acquisition-related costs 1 — 0.03 Restructuring charges 2 0.04 — Non-cash impairment charges 3 1.09 — Tax impact of stock-based compensation 4 (0.05) (0.03) Adjusted net earnings per diluted share $ 4.21 $ 4.20 Effective tax rate 17.7 % 19.8 % Non-cash impairment charges 3 1.5 % — % Tax impact of stock-based compensation 4 1.2 % 0.4 % Adjusted effective tax rate 20.4 % 20.2 % 1 On January 13, 2022, we completed our acquisition of Intimidator.
GAAP to the most directly comparable non-GAAP financial performance measures for the fiscal years ended October 31, 2024 and 2023 (dollars in millions, except per share and percentage data): 44 Table of Contents Fiscal Years Ended October 31, 2024 October 31, 2023 Gross profit $ 1,549.3 $ 1,577.6 Acquisition-related costs 1 — 0.2 Restructuring charges 2 — 1.2 Productivity initiative 3 5.7 — Adjusted gross profit $ 1,555.0 $ 1,579.0 Gross margin 33.8 % 34.6 % Restructuring charges 2 — % 0.1 % Productivity initiative 3 0.1 % — % Adjusted gross margin 33.9 % 34.7 % Operating earnings $ 533.3 $ 430.7 Acquisition-related costs 1 — 0.4 Restructuring charges 2 — 5.0 Productivity initiative 3 27.2 — Non-cash impairment charges 4 — 151.3 Adjusted operating earnings $ 560.5 $ 587.4 Operating earnings margin 11.6 % 9.5 % Restructuring charges 2 — % 0.1 % Productivity initiative 3 0.6 % — % Non-cash impairment charges 4 — % 3.3 % Adjusted operating earnings margin 12.2 % 12.9 % Earnings before income taxes $ 512.8 $ 400.5 Acquisition-related costs 1 — 0.4 Restructuring charges 2 — 5.0 Productivity initiative 3 23.1 — Non-cash impairment charges 4 — 151.3 Adjusted earnings before income taxes $ 535.9 $ 557.2 Income tax provision $ 93.9 $ 70.8 Restructuring charges 2 — 1.1 Productivity initiative 3 3.3 — Non-cash impairment charges 4 — 36.7 Tax impact of stock-based compensation 5 3.5 5.1 Adjusted income tax provision $ 100.7 $ 113.7 Net earnings $ 418.9 $ 329.7 Acquisition-related costs 1 — 0.4 Restructuring charges 2 — 3.9 Productivity initiative 3 19.8 — Non-cash impairment charges 4 — 114.6 Tax impact of stock-based compensation 5 (3.5) (5.1) Adjusted net earnings $ 435.2 $ 443.5 Net earnings per diluted share $ 4.01 $ 3.13 Restructuring charges 2 — 0.04 Productivity initiative 3 0.19 — Non-cash impairment charges 4 — 1.09 Tax impact of stock-based compensation 5 (0.03) (0.05) Adjusted net earnings per diluted share $ 4.17 $ 4.21 Effective tax rate 18.3 % 17.7 % Productivity initiative 3 (0.2) % — % Non-cash impairment charges 4 — % 1.5 % Tax impact of stock-based compensation 5 0.7 % 1.2 % Adjusted effective tax rate 18.8 % 20.4 % 45 Table of Contents 1 On January 13, 2022, we completed our acquisition of Intimidator.
As a result of the combination of quarterly cash dividends and share repurchases, we returned $201.9 million of cash to our shareholders during fiscal 2023.
As a result of the combination of quarterly cash dividends and share repurchases, we returned $395.0 million of cash to our shareholders during fiscal 2024.
As of October 31, 2022 we had no outstanding borrowings under the revolving credit facility and $3.1 million outstanding under the sublimit for standby letters of credit, resulting in $596.9 million of unutilized availability under our revolving credit facility.
As of October 31, 2024 we had no outstanding borrowings under the revolving credit facility and $2.7 million outstanding under the sublimit for standby letters of credit, resulting in $897.3 million of unutilized availability under our revolving credit facility.
Cash Dividends In each quarter of fiscal 2023, our Board of Directors declared a common stock cash dividend of $0.34 per share, which was a 13.3 percent increase over our common stock cash dividend of $0.30 per share paid each quarter in fiscal 2022.
Cash Dividends In each quarter of fiscal 2024, our Board of Directors declared a common stock cash dividend of $0.36 per share, which was a 5.9 percent increase over our common stock cash dividend of $0.34 per share paid each quarter in fiscal 2023.
The total amount of receivables due from Red Iron to us as of October 31, 2023 and 2022 were $34.4 million and $17.7 million, respectively. The net amount of receivables financed for dealers and distributors under the arrangements with HCFC and the other third-party financial institutions during fiscal 2023 and 2022 was $545.4 million and $633.5 million, respectively.
The total amount of receivables due from Red Iron to us as of October 31, 2024 and 2023 were $26.0 million and $34.4 million, respectively. 42 Table of Contents The net amount of receivables financed for dealers and distributors under the arrangements with HCFC and the other third-party financial institutions during fiscal 2024 and 2023 was $612.1 million and $545.4 million, respectively.
Changes in foreign currency exchange rates resulted in a decrease in our net sales of $5.5 million in fiscal 2023. The international net sales increase was primarily driven by higher shipments and net price realization in the Professional segment, partially offset by lower shipments in the Residential segment.
The international net sales decrease was primarily driven by lower shipments of Residential segment products, partially offset by higher shipments of Professional segment products. Changes in foreign currency exchange rates resulted in a decrease in our net sales of $4.1 million in fiscal 2024.
Selling, General and Administrative ("SG&A") Expense SG&A expense increased $66.7 million, or 7.2 percent, in fiscal 2023 compared to fiscal 2022. Refer to Note 1, Summary of Significant Accounting Policies and Related Data , of the Notes to Consolidated Financial Statements within the section entitled "Selling, General and Administrative Expense" for a description of expenses included in SG&A expense.
Refer to Note 1, Summary of Significant Accounting Policies and Related Data , of the Notes to Consolidated Financial Statements within the section entitled "Selling, General and Administrative Expense" for a description of expenses included in SG&A expense.
Excluding Intimidator, the WACC rate could be increased by over 500 basis points with no impairment indicated for any of our reporting units. Excluding Intimidator, the terminal growth rate could be decreased by 300 basis points with no impairment indicated for any of our reporting units.
The WACC rate could be increased by 140 basis points with no impairment indicated for any of our reporting units. Additionally, the terminal growth rate could be decreased by 210 basis points with no impairment indicated for any of our reporting units.
Additionally, these non-GAAP financial measures facilitate our internal comparisons to both our historical operating results and to our competitors' operating results by factoring out potential differences caused by charges and benefits not related to our regular, ongoing business, including, without limitation, certain non-cash, large, and/or unpredictable charges and benefits; acquisitions and dispositions; legal judgments, settlements, or other matters; and tax positions. 42 Table of Contents We believe that these non-GAAP financial measures, when considered in conjunction with our Consolidated Financial Statements prepared in accordance with U.S.
Additionally, these non-GAAP financial measures facilitate our internal comparisons to both our historical operating results and to our competitors' operating results by factoring out potential differences caused by charges and benefits not related to our regular, ongoing business, including, without limitation, certain non-cash, large, and/or unpredictable charges and benefits; acquisitions and dispositions; legal judgments, settlements, or other matters; and tax positions.
The following table presents our Professional segment's net sales, earnings, and earnings as a percentage of net sales (dollars in millions): Fiscal Years Ended October 31 2023 2022 Net sales $ 3,674.6 $ 3,429.6 Percentage change from prior year 7.1 % 17.1 % Segment earnings $ 509.1 $ 584.0 Segment earnings as a percentage of segment net sales 13.9 % 17.0 % Professional Segment Net Sales Net sales for our Professional segment in fiscal 2023 increased 7.1 percent compared to fiscal 2022.
The following table presents our Professional segment's net sales, earnings, and earnings margin (dollars in millions): Fiscal Years Ended October 31 2024 2023 Net sales $ 3,556.9 $ 3,674.6 Percentage change from prior year (3.2) % 7.1 % Segment earnings $ 638.9 $ 509.1 Segment earnings margin 18.0 % 13.9 % Professional Segment Net Sales Net sales for our Professional segment in fiscal 2024 decreased 3.2 percent compared to fiscal 2023.
Based on the resulting impairment assessment performed, we recorded an impairment charge of $18.0 million related to the indefinite-lived Spartan trade name intangible asset in the third quarter of fiscal 2023. For additional information regarding the impairment charge, refer to refer to Note 5, Goodwill and Other Intangible Assets .
Based on the resulting impairment assessment performed, we recorded an impairment charge of $18.0 million related to the indefinite-lived Spartan trade name intangible asset in the third quarter of fiscal 2023. For additional information regarding the impairment charge, refer to Note 1, Summary of Significant Accounting Policies and Related Data , of the Notes to Consolidated Financial Statements.
For additional information regarding this acquisition, refer to Note 2, Business Combinations and Asset Acquisitions , of the Notes to Consolidated Financial Statements. 2 In October of fiscal 2023, we initiated a restructuring program expected to be completed by the end of the first quarter of fiscal 2024.
For additional information regarding this acquisition, refer to Note 2, Acquisitions and Divestitures , of the Notes to Consolidated Financial Statements. 2 In the fourth quarter of fiscal 2023, we initiated a restructuring program which was completed in the first quarter of fiscal 2024.
This increase in other income, net was primarily due to higher income from our Red Iron joint venture and the favorable impact from derivative instruments in fiscal 2023 as compared to fiscal 2022. Provision for Income Taxes The effective tax rate for fiscal 2023 was 17.7 percent compared to 19.8 percent in fiscal 2022.
This increase in other income, net was primarily due to net gains on divestitures in fiscal 2024 and higher income from our Red Iron joint venture in fiscal 2024 as compared to fiscal 2023. Provision for Income Taxes The effective tax rate for fiscal 2024 was 18.3 percent compared to 17.7 percent in fiscal 2023.
Non-Cash Impairment Charges We recorded non-cash impairment charges of $151.3 million within our Professional segment related to Intimidator in fiscal 2023.
Non-Cash Impairment Charges We recorded non-cash impairment charges of $151.3 million within our Professional segment in fiscal 2023. No impairment charges were recognized in fiscal 2024.
The following table provides information with respect to repurchases of our common stock during the past two fiscal years (dollars in millions, except share and per share data): Fiscal Years Ended October 31 2023 2022 Shares of Board authorized common stock purchased 577,115 1,525,856 Cost to repurchase common stock $ 60.0 $ 140.0 Average price paid per share $ 103.97 $ 91.75 As of October 31, 2023, 6,949,491 shares remained available for repurchase under our Board authorized stock repurchase program.
The following table provides information with respect to repurchases of our common stock during the past two fiscal years (dollars in millions, except share and per share data): Fiscal Years Ended October 31 2024 2023 Shares of Board authorized common stock purchased 2,777,534 577,115 Cost to repurchase common stock $ 245.5 $ 60.0 Average price paid per share $ 88.39 $ 103.97 As of October 31, 2024, 8,171,957 shares remained available for repurchase under our share repurchase program.
Should these cash and cash equivalents be distributed in the future in the form of dividends or otherwise, we may be subject to foreign withholding taxes, state income taxes, and/or additional federal taxes for currency fluctuations.
We expect that $47.1 million of cash and cash equivalents held by our foreign subsidiaries will be indefinitely reinvested. Should these cash and cash equivalents be distributed in the future in the form of dividends or otherwise, we may be subject to foreign withholding taxes, state income taxes, and/or additional federal taxes for currency fluctuations.
Our remaining activities consisting of a wholly-owned domestic distribution company, Red Iron joint venture, certain corporate activities, and the elimination of intersegment revenues and expenses, are presented as "Other" due to their insignificance.
Segment earnings for our Professional and Residential reportable segments are defined as earnings from operations plus other income, net. Our remaining activities consisting of a wholly-owned domestic distribution company, Red Iron joint venture, certain corporate activities, and the elimination of intersegment revenues and expenses, are presented as "Other" due to their insignificance.
End-user retail financing is similar to floor planning with the difference being that retail financing programs are offered to end-user customers under which we, at our discretion, may pay a portion of interest costs on behalf of end-users for financing purchases of our equipment.
End-user financing is offered to end-user customers under which we, at our discretion, may pay a portion of interest costs on behalf of end-users for financing purchases of our equipment.
As of October 31, 2023, we had a strong liquidity profile with available liquidity of $750.5 million, consisting of cash and cash equivalents of $193.1 million and availability under our revolving credit facility of $557.4 million.
As of October 31, 2024, we had a strong liquidity profile with available liquidity of $1,096.8 million, consisting of cash and cash equivalents of $199.5 million and availability under our revolving credit facility of $897.3 million.
Cash Flows Cash flows provided by/(used in) operating, investing, and financing activities during the past two fiscal years are shown in the following table (dollars in millions): Cash Provided by/ (Used in) Fiscal Years Ended October 31 2023 2022 Operating activities $ 306.8 $ 297.2 Investing activities (157.7) (548.3) Financing activities (147.5) 42.2 Effect of exchange rates on cash 3.3 (8.5) Net increase (decrease) in cash and cash equivalents 4.9 (217.4) Cash and cash equivalents as of the end of the fiscal period $ 193.1 $ 188.2 Cash Flows from Operating Activities Our primary source of funds is cash generated from operations.
Fiscal 2024 capital expenditures of $103.5 million were $46.0 million lower than our fiscal 2023 capital expenditures of $149.5 million. 39 Table of Contents Cash Flows Cash flows provided by/(used in) operating, investing, and financing activities during the past two fiscal years are shown in the following table (dollars in millions): Cash Provided by/(Used in) Fiscal Years Ended October 31 2024 2023 Operating activities $ 569.9 $ 306.8 Investing activities (59.7) (157.7) Financing activities (505.1) (147.5) Effect of exchange rates on cash 1.3 3.3 Net increase in cash and cash equivalents 6.4 4.9 Cash and cash equivalents as of the end of the fiscal period $ 199.5 $ 193.1 Cash Flows from Operating Activities Our primary source of funds is cash generated from operations.
Our order backlog (including shipments beyond 12 months) decreased $343.4 million to $1,965.7 million as of October 31, 2023 from $2,309.1 million as of October 31, 2022, primarily driven by improved manufacturing output.
Our order backlog (including shipments beyond 12 months) decreased $0.8 billion to $1.2 billion as of October 31, 2024 from $2.0 billion as of October 31, 2023, primarily driven by improved manufacturing output.
The following table presents our Residential segment's net sales, earnings, and earnings as a percentage of net sales (dollars in millions): Fiscal Years Ended October 31 2023 2022 Net sales $ 854.2 $ 1,068.6 Percentage change from prior year (20.1) % 5.8 % Segment earnings $ 68.9 $ 112.7 Segment earnings as a percentage of segment net sales 8.1 % 10.5 % Residential Segment Net Sales Net sales for our Residential segment in fiscal 2023 decreased by 20.1 percent compared to fiscal 2022.
The following table presents our Residential segment's net sales, earnings, and earnings margin (dollars in millions): Fiscal Years Ended October 31 2024 2023 Net sales $ 998.3 $ 854.2 Percentage change from prior year 16.9 % (20.1) % Segment earnings $ 78.4 $ 68.9 Segment earnings margin 7.9 % 8.1 % Residential Segment Net Sales Net sales for our Residential segment in fiscal 2024 increased by 16.9 percent compared to fiscal 2023.
GAAP, provide investors with useful supplemental financial information to better understand our core operational performance and cash flows. These non-GAAP financial measures should not be considered superior to, as a substitute for, or as an alternative to, and should be considered in conjunction with, the most directly comparable U.S. GAAP financial measures.
These non-GAAP financial measures should not be considered superior to, as a substitute for, or as an alternative to, and should be considered in conjunction with, the most directly comparable U.S. GAAP financial measures.
Corporate activities include general corporate expenditures, such as finance, human resources, legal, information technology, public relations, business development, and similar activities, as well as other unallocated corporate assets and liabilities, such as corporate facilities and deferred tax assets and liabilities. The following information provides perspective on the net sales and operating results of our reportable business segments and Other activities.
Corporate activities include general corporate expenditures, such as finance, human resources, legal, information technology, public relations, business development, and similar activities, as well as other unallocated corporate assets and liabilities, such as corporate facilities and deferred tax assets and liabilities.
While our annual impairment assessment performed in the fourth quarter of fiscal 2023 supported the carrying amount of our goodwill and indefinite-lived intangible assets, we may be required to re-evaluate the carrying amount in future periods utilizing different inputs and assumptions that reflect the then current market conditions and expectations regarding our operating performance, which may result in a future impairment that could be material. 48 Table of Contents Product Warranty Guarantees Our products are warranted to provide assurance that the product will function as expected and to ensure customer confidence in design, workmanship, and overall quality.
While our annual impairment assessment performed in the fourth quarter of fiscal 2024 supported the carrying amount of our indefinite-lived intangible assets, we may be required to re-evaluate the carrying amounts in future periods utilizing different 49 Table of Contents inputs and assumptions that reflect the then current market conditions and expectations regarding our operating performance, which may result in a future impairment that could be material.
GAAP financial measures are included in the section titled "Non-GAAP Financial Measures." COMPANY OVERVIEW Executive Summary Our fiscal 2023 results included the following items of significance that are provided in summary format here and described in greater detail throughout the "Results of Operations," "Business Segments," and "Financial Position" sections: • Consolidated net sales for fiscal 2023 were $4,553.2 million, an increase of 0.9 percent compared to $4,514.7 million in fiscal 2022. • Professional segment net sales for fiscal 2023 were $3,674.6 million, an increase of 7.1 percent compared to $3,429.6 million in fiscal 2022. • Residential segment net sales for fiscal 2023 were $854.2 million, a decrease of 20.1 percent compared to $1,068.6 million in fiscal 2022. • Gross margin was 34.6 percent in fiscal 2023, an increase of 130 basis points compared to 33.3 percent in fiscal 2022. • Adjusted gross margin was 34.7 percent in fiscal 2023, an increase of 130 basis points compared to 33.4 percent in fiscal 2022. • SG&A expense as a percentage of net sales in fiscal 2023 was 21.8 percent, an increase of 130 basis points compared to 20.5 percent in fiscal 2022. • Net earnings for fiscal 2023 were $329.7 million, or $3.13 per diluted share, compared to $443.3 million, or $4.20 per diluted share, in fiscal 2022. 34 Table of Contents • Adjusted net earnings for fiscal 2023 were $443.5 million, or $4.21 per diluted share, compared to $444.2 million, or $4.20 per diluted share, in fiscal 2022. • Field inventory was higher as of the end of fiscal 2023 compared to the end of fiscal 2022, primarily driven by channel replenishment and lower than anticipated retail demand from homeowners who prefer professional solutions. • Our order backlog represents unfulfilled customer orders at a point in time.
GAAP financial measures are included in the section titled "Non-GAAP Financial Measures." COMPANY OVERVIEW Executive Summary Our fiscal 2024 results included the following items of significance that are provided in summary format here and described in greater detail throughout the "Results of Operations," "Business Segments," and "Financial Position" sections: • Consolidated net sales for fiscal 2024 were $4,583.8 million, an increase of 0.7 percent compared to $4,553.2 million in fiscal 2023. • Professional segment net sales for fiscal 2024 were $3,556.9 million, a decrease of 3.2 percent compared to $3,674.6 million in fiscal 2023. • Residential segment net sales for fiscal 2024 were $998.3 million, an increase of 16.9 percent compared to $854.2 million in fiscal 2023. • Gross margin was 33.8 percent in fiscal 2024, a decrease of 80 basis points compared to 34.6 percent in fiscal 2023. • Adjusted gross margin was 33.9 percent in fiscal 2024, a decrease of 80 basis points compared to 34.7 percent in fiscal 2023. • SG&A expense as a percentage of net sales in fiscal 2024 was 22.2 percent, an increase of 40 basis points compared to 21.8 percent in fiscal 2023. • Net earnings for fiscal 2024 were $418.9 million, or $4.01 per diluted share, compared to $329.7 million, or $3.13 per diluted share, in fiscal 2023. • Adjusted net earnings for fiscal 2024 were $435.2 million, or $4.17 per diluted share, compared to $443.5 million, or $4.21 per diluted share, in fiscal 2023. 35 Table of Contents • Field inventory was higher as of the end of fiscal 2024 compared to the end of fiscal 2023, primarily due to increased shipments of golf and grounds and construction products driven by improved manufacturing output and increased shipments of lawn care equipment to our mass channel partners, partially offset by lower shipments of snow and ice management products and reductions in dealer field inventories of lawn care equipment. • Our order backlog represents unfulfilled customer orders at a point in time.
These investments are intended to enable sales growth in new, existing, and expanding markets, help us meet product demand, and increase our manufacturing efficiencies and capacity. Cash used in investing activities in fiscal 2023 decreased by $390.6 million from fiscal 2022. This decrease was primarily due to cash used to acquire Intimidator in fiscal 2022 that was not repeated.
These investments are intended to enable sales growth in new, existing, and expanding markets, help us meet product demand, and increase our manufacturing efficiencies and capacity. In fiscal 2024, cash used in investing activities decreased $98.0 million from fiscal 2023.
The following factors impacted our average net working capital during fiscal 2023 as compared to fiscal 2022: • Average net receivables increased by 7.8 percent, primarily driven by payment terms.
The following factors impacted our average net working capital during fiscal 2024 as compared to fiscal 2023: • Average net receivables increased by 26.6 percent, primarily driven by increased mass channel and international shipments, as well as payment terms to our mass channel.
This net sales increase was primarily driven by net price realization, higher shipments of Professional segment products, and the incremental net sales attributable to the acquisition of Intimidator, partially offset by lower shipments of Residential segment products. Net sales in international markets were $947.7 million for fiscal 2023 compared to $879.2 million in fiscal 2022, an increase of 7.8 percent.
This net sales increase was primarily driven by higher shipments of Residential segment products, partially offset by lower shipments of Professional segment products. Net sales in international markets were $923.0 million for fiscal 2024 compared to $947.7 million in fiscal 2023, a decrease of 2.6 percent.
As a percentage of net sales, SG&A expense was 21.8 percent in fiscal 2023 compared to 20.5 percent in fiscal 2022, an increase of 130 basis points. The increase in SG&A expense as a percentage of net sales was primarily driven by higher corporate expenses, higher marketing and warranty costs, and increased investment in research and engineering.
As a percentage of net sales, SG&A expense was 22.2 percent in fiscal 2024 compared to 21.8 percent in fiscal 2023, an increase of 40 basis points. The increase in SG&A expense as a percentage of net sales was primarily driven by higher corporate expenses, partially offset by lower marketing costs.
Our order backlog remains significantly elevated over what the company would consider normal, due to demand for golf and grounds equipment and underground and specialty construction products continuing to outpace production of such products. Please refer to the section titled "Non-GAAP Financial Measures" for reconciliations of non-GAAP financial measures to the most directly comparable reported U.S. GAAP financial measures.
Our order backlog remains significantly elevated over what the company would consider normal, due to demand for golf and grounds and underground construction products continuing to outpace production of such products.
In performing the quantitative analysis, we compare the carrying value of a reporting unit, including goodwill, to its fair value. If the fair value of the reporting unit exceeds its carrying value, goodwill of the reporting unit is not impaired.
If the fair value of the reporting unit exceeds its carrying value, goodwill of the reporting unit is not impaired.
AMP Initiative We recently announced a new "Amplifying Maximum Productivity" or AMP initiative, which is a multi-year initiative intended to result in annualized cost savings of more than $100 million by fiscal 2027, driven by sustainable supply-base, design-to-value, and route-to-market transformation. We expect to reinvest a portion of the savings from this initiative to drive further innovation and growth.
AMP Initiative In the first quarter of fiscal 2024, we launched a significant productivity initiative named AMP, which is a multi-year initiative intended to result in annualized cost savings of more than $100 million by fiscal 2027, driven by sustainable supply-base, design-to-value, route-to-market, and operational efficiency transformation.
No impairment charges were recognized in fiscal 2022. 36 Table of Contents Interest Expense Interest expense primarily consists of interest costs incurred on outstanding borrowings related to our fixed and variable interest rate debt arrangements, as well as amortization of the debt issuance costs associated with our debt arrangements.
Interest Expense Interest expense primarily consists of interest costs incurred on outstanding borrowings related to our fixed and variable interest rate debt arrangements, as well as amortization of the debt issuance costs associated with our debt arrangements. Interest expense for fiscal 2024 increased $3.2 million compared to fiscal 2023.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

7 edited+0 added−0 removed23 unchanged
Biggest changeAs of October 31, 2023, the average contracted rate, notional amount, fair value, and the gain at fair value of outstanding derivative instruments were as follows (dollars in millions, except average contracted rate): Average Contracted Rate Notional Amount Fair Value Gain at Fair Value Buy U.S. dollar/Sell Australian dollar 0.6796 $ 105.6 $ 112.2 $ 6.6 Buy U.S. dollar/Sell Canadian dollar 1.3317 42.4 43.9 1.5 Buy U.S. dollar/Sell Euro 1.1051 146.6 150.4 3.8 Buy U.S. dollar/Sell British pound 1.2352 43.5 44.1 0.6 Buy Mexican peso/Sell U.S. dollar 20.9278 $ 42.6 $ 46.8 $ 4.2 Our net investment in foreign subsidiaries translated into U.S. dollars is not hedged.
Biggest changeAs of October 31, 2024, the average contracted rate, notional amount, fair value, and the gain (loss) at fair value of outstanding derivative instruments were as follows (dollars in millions, except average contracted rate): Average Contracted Rate Notional Amount Fair Value Gain (Loss) at Fair Value Buy U.S. dollar/Sell Australian dollar 0.6652 $ 82.5 $ 83.4 $ 0.9 Buy U.S. dollar/Sell Canadian dollar 1.3485 48.9 50.0 1.1 Buy U.S. dollar/Sell Euro 1.1094 160.5 160.8 0.3 Buy U.S. dollar/Sell British pound 1.2716 62.4 61.6 (0.8) Buy Mexican peso/Sell U.S. dollar 19.6210 69.4 64.7 (4.7) Buy Japanese yen/Sell U.S. dollar 152.4370 $ 0.2 $ 0.2 $ — Our net investment in foreign subsidiaries translated into U.S. dollars is not hedged.
Any changes in foreign currency exchange rates would be reflected as a foreign currency translation adjustment, a component of accumulated other comprehensive loss in stockholders’ equity on the Consolidated Balance Sheets, and would not impact net earnings.
Any translation changes in foreign currency exchange rates would be reflected as a foreign currency translation adjustment, a component of accumulated other comprehensive loss in stockholders’ equity on the Consolidated Balance Sheets, and would not impact net earnings.
Refer to Note 9, Stock-Based Compensation , and Note 1, Summary of Significant Accounting Policies and Related Data , in the Notes to Consolidated Financial Statements for additional information regarding our stock-based compensation awards and our goodwill impairment analysis, respectively. 52 Table of Contents
Refer to Note 9, Stock-Based Compensation , and Note 1, Summary of Significant Accounting Policies and Related Data , in the Notes to Consolidated Financial Statements for additional information regarding our stock-based compensation awards and our goodwill impairment analysis, respectively. 53 Table of Contents
Interest rate risk for fixed-rate, long-term debt is estimated as the potential increase in the fair value of gross fixed rate debt, resulting from a hypothetical 10 percent decrease in interest rates, and amounts to $20.3 million.
Interest rate risk for fixed-rate, long-term debt is estimated as the potential increase in the fair value of gross fixed rate debt, resulting from a hypothetical 10 percent decrease in interest rates, and amounts to $16.3 million.
For additional information regarding our derivative instruments, refer to Note 13, Derivative Instruments and Hedging Activities , in the Notes to Consolidated Financial Statements included in Part II, Item 8, "Financial Statements and Supplementary Data," of this Annual Report on Form 10-K. The foreign currency exchange contracts in the table below have maturity dates in fiscal 2023 through fiscal 2026.
For additional information regarding our derivative instruments, refer to Note 13, Derivative Instruments and Hedging Activities , in the Notes to Consolidated Financial Statements included in Part II, Item 8, "Financial Statements and Supplementary Data," of this Annual Report on Form 10-K. The foreign currency exchange contracts in the table below have maturity dates in fiscal 2025 through fiscal 2027.
Our indebtedness as of October 31, 2023 included $524.2 million of gross fixed rate debt that is not subject to variable interest rate fluctuations and $510.0 million of gross variable rate debt under our term loan credit agreements and revolving credit 51 Table of Contents facility.
Our indebtedness as of October 31, 2024 included $524.2 million of gross fixed rate debt that is not subject to variable interest rate fluctuations and $400.0 million of gross variable rate debt under our term loan credit agreements and revolving credit 52 Table of Contents facility.
As of October 31, 2023, the estimated fair value of gross long-term debt with fixed interest rates was $478.2 million compared to its carrying amount of $524.2 million.
As of October 31, 2024, the estimated fair value of gross long-term debt with fixed interest rates was $520.4 million compared to its carrying amount of $524.2 million.

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